Speculation of a merger of Hungary’s MKB and Budapest Bank back on

By bne IntelliNews July 14, 2016

Speculation is rising that Hungary's newly-privatised MKB could take a role in the privatization of Budapest Bank, local press reported on July 14.

The Hungarian government bought Budapest Bank – the country’s eighth largest lender -  from GE Capital for $700mn last year, but plans to sell it this. Speculation about a merger of MKB and Budapest Bank is now rekindling, just two months or so after the government sold MKB and appointed a new commissioner of national financial services.

The government itself was the first to suggest the two banks could be merged, after the pair came into state hands. They were also earmarked to IPO on the Budapest Stock Exchange as the stars of an effort by the Magyar Nemzeti Bank (MNB) to revive the sleepy bourse, in which it took control in last November.

Those ideas, however, looked to have been abandoned. MKB, bought by the state in 2014, was sold in late April to investment funds allegedly owned by the country’s central bank.

However, with Budapest Bank's future yet to be clarified, speculation of a merger are now being rekindled. Unnamed sources told Vilaggazdasag that the two banks would clearly complement each other. “Such a transaction would be a logical move,” that would “bring about cost synergies,” they add. 

The MNB reportedly supports a merger; the central bank has long claimed there are too many large banks in Hungary. The MNB’s viewpoint might be represented more efficiently in government circles, it is claimed, now that a former member of the central bank’s monetary council has been appointed government commissioner of national financial services.

It is questionable, however, whether the new owners of MKB would be willing to pay $700mn for the full 100% stake in Budapest Bank. Economy Minister Mihaly Varga has insisted  the state wants "at least” its money back for the lender.

According to Vilaggazdasag, the state might also try to sell some of the bank to the EBRD or other investors via an IPO. Budapest Bank said earlier this year that it is ready to list its shares on the Budapest Stock Exchange should its owner opt for such an option.

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