Hungary's efforts to sell Budapest Bank stalling - sources

MBH Jelzalogbank Nyrt

17/11/2016 16:42

* Officials have previously said sale could start this year 
    * Hungary has until early 2018 to sell major banking stakes 
    * Some say bank may not fetch sufficiently high price now 
 
    By Gergely Szakacs 
    BUDAPEST, Nov 17 (Reuters) - Efforts by Hungary's government 
to sell Budapest Bank have stalled, according to banking 
industry sources, raising doubts about whether it will be able 
to meet a pledge it made in 2015 to sell majority shareholdings 
in the sector within three years.  
    After taking office six years ago Prime Minister Viktor 
Orban nationalised several banks and implemented policies to cut 
foreign ownership in the sector. This included levying Europe's 
highest bank tax and other measures only to find they led to a 
reduction in lending and left what used to be a largely 
foreign-owned industry struggling to turn a profit.  
    Last year, following a dip in investments, the government 
agreed to reshape its relationship with the banks in return for 
more lending.  
    Under the agreement Hungary and the European Bank for 
Reconstruction and Development have bought 15 percent stakes in 
Erste Bank Hungary from its Austrian owner Erste Group Bank 
 ERST.VI  to help strengthen its capital base to support more 
lending. 
    The government also committed itself to transferring all its 
majority stakes in local banks to the private sector within 
three years. 
    Orban has increased Hungarian ownership of local banks, 
previously dominated by foreign names, to above 50 percent and 
the state sold its holding in MKB Bank, the country's sixth 
largest bank by assets, to a consortium of investors earlier in 
June for $134 million.  urn:newsml:reuters.com:*:nB3N17G00Z 
    Meanwhile the government bought Budapest Bank from GE 
Capital  GE.N  for $700 million in 2015, and officials said the 
resale process would start in 2016.  
    But Orban has yet to give any details on how the government 
plans to privatise Hungary's ninth-largest lender and the 
sources say the government is running out of time before it 
faces elections in 2018. 
    "The big issue is that the government wants to get what it 
paid for and that is a hell of a multiple in today's market," 
one of the sources said. 
    "Nothing is going to be decided by the end of this year, but 
you might get a statement indicating that the intention is to 
sell," the source said.  
    When asked about when Budapest Bank could be sold, 
Development Ministry spokesman Gergely Arzt said: 
    "The work regarding the strategic direction of the bank is 
ongoing. The decision will be made taking market developments, 
as well as the interests of the Hungarian state and Budapest 
Bank into account." 
    Arzt declined to comment on the reasons for the delay. A 
spokeswoman for Budapest Bank declined to comment. 
 ($1 = 289.16 forints) 
 ($1 = 0.9326 euros) 
 
 (Editing by Rachel Armstrong, Greg Mahlich) 
 ((gergely.szakacs@tr.com; +36 1 327 4748; Reuters Messaging: 
gergely.szakacs.thomsonreuters.com@reuters.net)) 
 
Keywords: BUDAPEST BANK/SALE