Hungary could back out of deal to buy Erste stake, claims minister

By bne IntelliNews April 26, 2016

Hungary could still back out of a planned acquisition of a stake in Erste Bank's local unit, the economy minister claimed in comments published on April 25.

Mihaly Varga’s statement comes as significant surprise; the acquisition of a 15% stake in Erste by both Budapest and the European Bank for Reconstruction and Development (EBRD) is seen as the final seal on the  banking "peace deal" announced in February 2015. The EBRD's head for Hungary confirmed to bne IntelliNews earlier this month that the institution hopes to finally put the acquisitions to bed by June.

However, in an interview with Vilaggazdasag Varga noted that the deal has progressed far more slowly than expected. The original deadline was June 2015.

"This is a matter of consideration,” Varga said. "Due diligence of the bank has been completed, a price level has been set, but the government can still decide that instead of buying Erste it is more useful in the long run if we lower public debt."

However, Varga mentioned no further details about a possible modification of the peace deal. Under the plan, the government pledged to lower the bank tax and refrain from policy making that would put lenders under stress, while Erste promised to raise lending.

The EBRD said in April it would consider participating in merger and acquisition transactions that support banking consolidation in Hungary, but only if Hungary implements its commitments detailed in the banking peace deal. The Magyar Nemzeti Bank has said several times that it would like the EBRD to be involved in the sale of state-owned banks MKB and Budapest Bank.

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