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Hungary aims for quick decision on 3-way bank merger

Thu 18th June, 2020 11:38am
* 3-bank merger would create Hungary's second-largest lender
    * Proposed tie-up would advance PM Orban's economic agenda
    * Plan still faces economic hurdles

    By Gergely Szakacs
    BUDAPEST, June 18 (Reuters) - Hungary plans to decide "very
quickly" on a proposed three-bank merger to create the country's
second biggest lender, a government minister said, signalling
strong political will to push ahead with the project before
elections in spring 2022.
    State-owned Budapest Bank said last month it would join in
merger plans of MKB Bank and savings and loans group Takarek
(MTB), creating a bank with assets worth 5.8 trillion forints
($18.93 billion) and offering scope for potential cost savings.
 urn:newsml:reuters.com:*:nL8N2D84WE
    The merger, which would allow the trio to leapfrog over 
foreign rivals in Hungary in terms of size, fits Prime Minister
Viktor Orban's agenda to boost the role of domestic players in
key sectors of the economy such as finance, energy and the
media. 
    Hungary acquired Budapest Bank from GE Capital in 2015 and
government officials said it would make be a good match for MKB,
which is emerging from a European Union restructuring process.
    Takarek, which has an extensive rural branch network, has
been working to transform itself into a universal banking group
to compete with rivals OTP  OTPB.BU , Austria's Erste Group
 ERST.VI  or Belgium's KBC  KBC.BR .
    "We need to move very quickly," Orban's minister in charge
of state assets, Andrea Mager told Reuters in an interview when
asked about the merger. "We cannot have either one of these
banks exposed to uncertainty regarding this option for long."
    Despite the political will, the project faces serious
challenges, including the likelihood of recession due to the
coronavirus pandemic, which could curb lending activity and
trigger a rise in bad loans.  urn:newsml:reuters.com:*:nL8N2DU4GE
    Some bankers have also privately expressed scepticism about
the project given the complexity of merging banks with different
business profiles and corporate cultures.
    "You may have three well-functioning standalone banks, but
that alone does not guarantee that their combination will also
work," said a banking source with experience in M&A deals.
    Mager declined to give a timeline, saying the group was
hiring advisers currently to explore potential synergies.
    "The goal is to have a strong second bank from this
co-operation," she said. "If they want to be an assertive
competitor, they will need to reflect this in their pricing as
well."
    However, she dismissed the notion that the project would be
aimed at dominant player OTP.
    OTP Bank is Hungary's banking market leader and central
Europe's largest independent lender, which is present in a dozen
countries and had total assets of 21.9 trillion forints at the
end of the first quarter.  urn:newsml:reuters.com:*:nL8N2D84WE
    OTP's core Hungarian subsidiary alone is nearly twice the
size of the post-merger trio with total assets of 10.5 trillion
forints.
    If the three-way merger goes ahead the group would have more
than 900 branches, double the size of OTP's network, which would
need streamlining to realise cost savings from the deal -- a
politically painful prospect for 2021, a pre-election year.
($1 = 306.41 forints)

 (Reporting by Gergely Szakacs. Editing by Jane Merriman)
 ((gergely.szakacs@reuters.com ; https://twitter.com/szakacsg ;
+36 1 882 3606 ;
https://www.reuters.com/journalists/gergely-szakacs))
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