Hungary's FHB Bank faces possible Moody's downgrade

MBH Jelzalogbank Nyrt

21/06/2016 19:56

By Marton Dunai 
    BUDAPEST, June 21 (Reuters) - Ratings agency Moody's has 
placed Hungary's FHB Bank  FHBK.BU  under review for a downgrade 
after continued losses were exacerbated by a police 
investigation and a large bond repurchase hit its capital 
position. 
    FHB found itself in authorities' crosshairs this month with 
complaints from sector peers followed by a concerted government 
and central bank effort to tighten control over its business 
network in a move widely seen as being aimed at its billionaire 
chairman.  urn:newsml:reuters.com:*:nL8N1921NX 
    The scrutiny came suddenly after years of government support 
that FHB Chairman Zoltan Speder used to build a wide network of 
partners that includes the Hungarian Post and the development 
bank MFB. 
    Analysts have said the turnaround was a blow to FHB's basic 
business model, which would have to be reviewed. 
    The statement from Moody's on Tuesday was the first ratings 
agency warning about FHB and cited increased risks to the bank's 
solvency and business prospects and concerns about the effects 
of negative publicity on the bank's franchise. 
    FHB did not comment on the Moody's action in a statement on 
the Budapest bourse website and merely informed investors of the 
warning. A spokesman for the company said there would be no 
further comment. 
    "Any possible charges against the bank of serious 
wrongdoings has the potential to result in material financial 
and reputational costs for FHB and to further weaken its 
solvency," Moody's said. 
    It also cited an FHB decision to buy back 112 million euros  
($126 million) of subordinated debt to address a regulatory fine 
for misleading markets about a 2012 bond issue -- a move that 
FHB said would cut its capital adequacy to 10.8 percent from 16 
percent.  urn:newsml:reuters.com:*:nL8N19946L 
    That might be compounded with other risks, Moody's said. 
    "FHB's capitalisation will likely remain under pressure 
stemming from high loan-loss provisions, declining revenues and 
other costs that could be imposed by the Hungarian authorities," 
the ratings agency said. 
    FHB shares fell to their lowest level since the integration 
with the savings and loan sector began in 2013, erasing 40 
percent of its value in 10 days. 
    The National Bank of Hungary (NBH), which is the country's 
market regulator, could not be reached for comment about FHB's 
situation. 
    The NBH has the right to take control of banks that face 
solvency problems. 
($1 = 0.8881 euros) 
 
 (Additional reporting by Gergely Szakacs; Editing by David 
Goodman) 
 ((marton.dunai@thomsonreuters.com; +36-1-327-4742; Reuters 
Messaging: marton.dunai.thomsonreuters.com@reuters.net)) 
 
Keywords: HUNGARY MOODY'S/FHB