Hungary's FHB buys into state-controlled Takarekbank

By bne IntelliNews February 7, 2014

bne -

Hungary's FHB Bank has bought a 25% stake in state-controlled Takarekbank via a capital increase, FHB announced on February 6, as Hungary pushes to increase the role of local owners in the financial system.

One of the country's largest mortgage lenders, FHB said in a statement that it bought out a HUF252m (€820,250) capital increase by Takarekbank held on February 3.

It has long been speculated that FHB is planning to take control of Takarekbank, the umbrella bank for the country's savings cooperatives, with the state set to sell its 55% stake within two months. But a spokesman for FHB declined to say whether whether the bank wants to buy that stake too, reports Reuters. Hungary is set to sell its Takarekbank stake by March 15, reports Bloomberg, referring to a cabinet decision in December.

Ahead of the capital increase, the state held a stake of more than 35% in Takarekbank through state development bank MFB, and a further 19.3% stake via Hungarian Post.

FHB is seeing "organic growth" from Hungary's improving macroeconomic environment and increasing margins, Jozsef Miro, an equity analyst at Erste told Bloomberg in mid-January. In addition, the banks shares have more than doubled in price since mid-October on the back of speculation of a Takarekbank purchase. FHB chairman Zoltan Speder, this year increased his shareholding in FHB to 20%.

The Takarekbank network - 1,600 outlets, constituting close to 40% of total bank branches in the country - is seen as important for the centre-right, paternalistic Fidesz government. Its branches are, for the most part, set in smaller towns in rural Hungary, where support is at its greatest.

The government has recently been concentrating on developing alternative means of getting credit to the economy, its rough treatment of the major banks having seen lending virtually come to a standstill. The central bank's Funding for Growth scheme to small business and for house improvements is seen as vital to keep Hungary's economic recovery on track. Takarekbank was thrust to the forefront of the scheme as it started up earlier this year, despite holding just a 5% market share overall at the time.

MFB bought its stake in Takarekbank from Germany's DZ Bank in 2012, as part of Orban's strategy for the state to fill the lending void. In June, Budapest unveiled a plan to pump HUF100bn (€335m) into Takarekbank to prepare it for the role. A spokesman explained at the time that the cash would be used to "reorganize" the country's cooperative banks.

The likely sale to FHB suggests that with loyalists now in control at the central bank and driving lending, the government is happy to have local investors help develop Hungarian banking.

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