Only five major banks may survive in Hungary: bankers

MBH Jelzalogbank Nyrt

02/10/2014 16:07

* Major foreign banks also expect shape of market to change 
    * Sector reeling under heavy tax burden, big one-off losses 
 
    By Gergely Szakacs 
    BUDAPEST, Oct 2 (Reuters) - There may be room for only five 
major banks in Hungary, bankers said on Thursday, as lenders 
weigh the cost of compensating people who took out risky foreign 
currency mortgages.   
    Central bank Managing Director Marton Nagy told the Reuters 
Eastern Europe Investment Summit earlier this week that just 
five major banks would remain in Hungary after competing for 
clients when Swiss franc and euro mortgages are converted next 
year.  ID:nL6N0RV2ZM   
    Speaking at a conference organised by financial news website 
portfolio.hu on Thursday, Nagy said the only way forward for 
lenders in Hungary, who are paying one of Europe's highest bank 
levies, will be to merge or leave. 
    Other senior bankers agreed that heavily-taxed banks who 
have been slashing costs for years will find it increasingly 
hard to boost profits.     
    All the major foreign banks in Hungary, which include 
Austrian Erste Bank  ERST.VI  and Raiffeisen  RBIV.VI , Italian 
Intesa Sanpaolo  ISP.MI  and UniCredit  CRDI.MI  and Belgian KBC 
 KBC.BR , have said they would not pull out.  
    Major local banks include OTP  OTPB.BU , KBC  KBC.BR  and 
MKB, which the government bought recently. Each of these groups 
has a combined share of just over a third of the Hungarian 
market.  
    "It may well be that every bank wants to stay but at the end 
of the competition, which will be a competition in pricing, in 
efficiency and scale, five banks will remain because for the 
rest it will not be worth it," Nagy said. 
    The heads of major foreign banks in Hungary who took part in 
a panel discussion, including GE Capital, Erste and Raiffeisen, 
largely shared that assessment. 
    "The cake in terms of total bank revenues going forward will 
be smaller than it was before the crisis, that is clear," 
Raiffeisen Hungary's Chief Executive Heinz Wiedner said. 
    "In reality, the question is how many banks, large universal 
banks can be profitable going forward under that scenario. 
Whether it is four, five, six, it is hard to say, I would not 
put a number," he said. 
    But he added that if mergers were the desired way to reach 
that objective, some incentives would be required to facilitate 
the process. 
    "If you merge two banks today, you have to pay immediately 
double the banking tax on 2009 balance sheets and today the 
balance sheets are probably 30 percent smaller than at that 
time," Wiedner said. 
    "But that there will be in the longer run some change in the 
banking system, I do believe that there will be, but then I 
think also rules of the game will have to be changed," he said. 
    Austrian peer Erste's Chief Executive Radovan Jelasity added 
it was probably just a matter of time. 
    "We have been saying this since 2009, 2010, 2011 that this 
should definitely happen," Jelasity said. 
    "I think both sides will he happy once this happens, those 
who are part of the five (that remain) as well as those that are 
not, because this will significantly contribute to the better 
functioning of the banking sector," he said. 
 
 (Editing by Ruth Pitchford) 
 ((gergely.szakacs@thomsonreuters.com; +36 1 327 4748; Reuters 
Messaging: gergely.szakacs.thomsonreuters.com@reuters.net)) 
 
Keywords: HUNGARY BANKS