Hungary would benefit from a new domestic banking group, MKB chief says

MBH Jelzalogbank Nyrt

26/04/2019 14:41

* Local market dominated by OTP Bank, big foreign names
    * PM Orban has worked to reduce influence of foreign lenders
    * Government hoping to sell profitable Budapest Bank this
year
    * Foreign and domestic investors have expressed interest

    By Gergely Szakacs
    BUDAPEST, April 26 (Reuters) - Hungary would benefit from
having another major domestic bank, the head of MKB Bank said on
Friday, without shedding light on whether MKB would bid for
Budapest Bank, which was put up for sale this year.
    Since taking power in 2010, Prime Minister Viktor Orban has
overhauled the local bank sector, boosting domestic ownership to
more than 50 percent in a market previously dominated by large
foreign lenders.
    The biggest lender by far remains Hungary's OTP Bank
 OTPB.BU , followed by the local units of Belgian KBC  KBC.BR ,
Italian UniCredit  CRDI.MI  and Intesa SanPaolo  ISP.MI ,
Austrian Erste Group Bank  ERST.VI  and Raiffeisen  RBIV.VI .
    "On the whole, it would be more healthy to have another big
domestic banking centre," MKB Bank Chief Executive Adam Balog
told a news conference on Friday in response to questions about
the privatisation of Budapest Bank.
    "This could still mean there are many foreign banks
remaining, competition staying healthy and the domestic-foreign
exposure staying appropriate," he said.
    Balog added however that this was his "general opinion", and
could only discuss specifics about Budapest Bank once MKB learns
concrete details about the process.
    Orban's government has said Budapest Bank should be sold for
no less than the $700 million it paid to the financial arm of
General Electric  GE.N  when it bought the bank in 2015.
    Budapest Bank mainly serves small businesses but has also
expanded heavily in retail lending in recent years, posting a
2018 net profit of 12.5 billion forints ($43 million). The
minister in charge of the sale is due to report to the cabinet
by June 30.
    Banks in Hungary have enjoyed a lending revival and hefty
economic growth and the acquisition could provide a further boon
by enabling the buyer to cut costs.
    KBC, Erste Group and Raiffeisen have all signalled interest
in Budapest Bank, Hungary's eighth-largest lender by 2017
assets, as has Takarek  TAKA.BU , a domestic savings and loans
group, which is transforming into a universal bank.  urn:newsml:reuters.com:*:nL8N1Y54J5
    Hungary has targeted at least 50 percent domestic ownership
in the banking sector, a key plank in Orban's economic policy,
which could mean Budapest Bank will end up in domestic hands.
    Lorinc Meszaros, an associate of PM Orban, controls a 48.6
percent stake in MKB Bank according to an August 2018 disclosure
by holding company Konzum, itself linked to Meszaros, whose
businesses have flourished under Orban's rule.
    A top Konzum official told business website portfolio.hu in
September that the group was looking for sizeable deals in four
markets, including banking, real estate and telecommunications. 
  
    MKB's Balog said, however, that the bank, which is in the
final stages of a European Union-sanctioned restructuring
process, still had some restrictions on business activity, even
though a ban on acquisitions had already expired.  urn:newsml:reuters.com:*:nL8N1Y34KM
    One condition imposes a 1.8 to 2 trillion forint limit on
the size of its balance sheet at the end of this year compared
with 1.86 trillion forints at the end of 2018.
    "This means we cannot own any asset which would affect this
restriction," Balog said.
  ($1 = 288.7900 forints)

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