The cabinet of Prime Minister Viktor Orban has declared the consolidation of three banks owned by the state or businessmen close to the ruling Fidesz party of national strategic importance, according to a decree published in the official gazette on December 10. The government has used that legal framework for more than 100 transactions, more than any other government in the past. 

The status guarantees that the tie-up of MTB Magyar Takarekszovetkezeti Bank, MKB Bank and state-owned Budapest Bank will be speeded up and more importantly exempts the deal from competition oversight by the competition watchdog GHV.

Takarekbank Group, MKB Bank and Budapest Bank agreed to transfer their shares to a joint holding company, Magyar Bankholding in late October. 

The owners of MTB Magyar Takarekszovetkezeti Bank, the "central bank" for Hungary's integrated savings cooperatives, acquired a 37.69% stake in Magyar Bankholding; the owners of MKB 31.96%; and, the state took a 30.35% through investment fund Corvinus International Investment. 

The future merger of the three banks will create the second-largest banking group in Hungary after OTP, although it will only be around a quarter of the size of CEE's largest lender with consolidated market value of HUF744bn (€2.1bn).

Magyar Bankholding's balance is around HUF5.8 trillion compared to OTP's HUF22.7 trillion.

The consolidation of the three banks is part of a wider plan backed by government and Orban to boost the share of Hungarian ownership over 50% in strategic sectors such as media, retail, energy and banking. Counting OTP as a Hungarian-owned lender, this has already materialised as the state has acquired Budapest Bank and businessmen close to the prime minister bought stakes in MKB Bank.

Market players are of the view that it will be an extremely difficult task to merge banks with such different organisational cultures and infrastructure at a time when rivals are investing heavily in digital transition.

On the other hand, the banks’ customer bases complement each other well. MTB has a strong presence in smaller rural areas with a solid SME base and retail clientele in agriculture, which fits well with MKB's and Budapest Bank's affluent urban clientele. The latter two also have steady positions in SME lending, private banking and leasing.