Erste buys Citigroup's Hungarian retail bank

By bne IntelliNews September 2, 2015

bne IntelliNews -

 

Austria's Erste Group has signed a deal to buy Citigroup's Hungarian retail banking business, the banks announced on September 2. The value of the transaction was not disclosed.

The sale is the latest in a string of deals in which foreign lenders have quit Hungary over the past 18 months after years of government interference pushed them into losses. The state has also been pushing hard to raise the share of local ownership in the sector.

Erste agreed a deal to sell a stake in its Hungarian operation to Budapest and the EBRD early this year as part of a supposed peace treaty between banks and the government. That same subsidiary has now agreed to buy Citibank’s retail banking and investment business, as well as its consumer loans and cards units. The deal also includes CitiBusiness microenterprise accounts and the transfer of consumer banking employees.

The transaction is subject to regulatory approvals, which are expected by the end of 2015. The transfer of customer accounts is not expected to occur before the fourth quarter of 2016.

Citibank announced in October that it would seek to exit its consumer businesses in 11 countries, including Hungary, in a bid to focus on markets where it has the greatest scale and growth potential. The US bank will keep its corporate banking business in Hungary.

By buying Citi’s consumer business Erste will expand its retail customer portfolio to become the second largest in Hungary, Radovan Jelasity, CEO for Erste Bank Hungary, said in a statement.

The deal comes as Erste is in the process of selling a 15% stake in its Hungarian unit to the state under a deal brokered in February. As part of the deal, in which the EBRD will buy a similar stake, Budapest pledged to ease the high tax burden on banks and refrain from inflicting more pain on the sector. Erste agreed to pump an extra €550mn in loans into the economy.

Hungary’s acquisition of Erste Hungary’s stake, set to be completed by the end of 2015, is part of the government’s strategy to boost local ownership of the banking sector. Over the past year, the government bought the country’s fourth-biggest lender MKB, as well as Budapest Bank.

Now with skin in the game, the government is offering some relief to embattled banks after years of punitive policies. It has pushed through a bill that will graducally reduce the country's high banking tax from next year. It is also mulling additional tax breaks for banks that increase their lending compared to 2009 levels. Data continues to show lending outside the central bank’s 'lending for growth' programme remains feeble.

The major motivation for Budapest is to convince the battered banks to resume lending in order to avoid an economic slowdown. After posting 3.6% GDP growth in 2014, the second fastest pace in the EU, Hungary looks set for a slowdown, with indicators mostly pointing downwards.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Erste claims Hungary is breaking peace deal with banks

bne IntelliNews - Hungary will breach its February agreement with Erste Group if it makes the planned reduction in the bank tax conditional on increased lending, the Austrian lender's CEO ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss