Hungary wants foreign suitors for MKB Bank

By bne IntelliNews October 5, 2015

bne IntelliNews -

 

Hungary's "preferred" ownership structure for MKB Bank would include foreign investors, the new CEO of the state-owned lender Adam Balog said on October 5. 

In the first public remarks since the central bank announced last week that it plans to launch the sale of the country's sixth largest bank, Balog told Reuters that the Magyar Nemzeti Bank is actively seeking capital from overseas. "It is explicitly preferred to have some degree of foreign ownership," he said. 

Balog's statement is somewhat of a surprise given that Budapest has repeatedly said it wants to keep MKB Bank in local hands ever since it bought the lender from German BayernLB last year for €55mn. The state acquisition of the bank was part of the government's strategy to boost local ownership in the sector. 

Last year the government also bought Budapest Bank from GE Capital for $700mn. The government is also in the process of buying a 15% in the local unit of Austria's Erste Bank with the EBRD to buy a similar interest. 

Balog, who left his role as second in command at the Magyar Nemzeti Bank (MNB) to take over MKB in July, said Hungary is already in touch with a number of potential suitors, with the central bank casting its net "very wide" to attract buyers. 

"The National Bank of Hungary prefers an ownership structure that ensures the MKB can remain an independent and strong member of the Hungarian bank sector and not merge into an existing entity", Balog said. 

Those comments, according to analysts at Portfolio.hu, suggest the MNB is trying to exclude a purchase of MKB by OTP, Hungary's largest bank by assets. The financial website suggested recently that OTP is seriously interested in acquiring MKB, though OTP has denied the claim. Previously close to the ruling Fidesz party, OTP's powerful senior executives have fallen out with the government over the past few years of rough treatment for the banking sector. 

Balog also said that the MNB, which aims to complete the sale of MKB by the end of 2015, would look to retain a 10-20% stake in the bank. Hungary aims to sell at least a 51% stake in MKB in an international tender managed by an investment bank, he added. 

However, international investors may well be tough to attract. With Fidesz accused of using policy to favour local groups close to senior officials, it has spent years handing down tough treatment to foreign investors in not only banking, but also retail, telecoms and agricultural to name but a few sectors. 

High taxes and a painful hit on the forced conversion of forex mortgages late last year has seen foreign banks cashing in over the past couple of years. Budapest now claims it is ready to call a truce and halt policy making that hurts lenders, which dropped into deep losses in 2013. However, the banks are proving wary of returning to lending to the economy. 

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