Bawag to Sell 10% Stake in Hungary's MKB, Cancels $520 Million Guarantee

Bawag PSK Bank, the Austrian bank owned by Cerberus Capital Management LP, has agreed with the European Union to sell its 10 percent stake in MKB Bank of Hungary and canceled its 400 million-euro ($520 million) guarantee from the Austrian state as of June 30.

The EU Commission, the EU’s competition authority in Brussels, has given the bank “sufficient” time to sell the stake in Budapest-based MKB, Chief Executive OfficerByron Haynes told reporters in Vienna yesterday, declining to comment on the exact deadline.

Bayerische Landesbank, Germany’s second-biggest state-owned lender that needed10 billion euros in fresh capital from the State of Bavaria, owns 89.8 percent in MKB. A sale of the stake “is being discussed” with the European Commission, BayernLB Chief Executive OfficerGerd Haeusler said in April.

The EU Commission is investigating government bailouts on concern the aid will give banks that had difficulties during the financial crisis an unfair advantage in the future. The commission may demand a sale of units as part of BayernLB’s restructuring measures.

Bawag was “highly profitable” in the first half of this year and will on Aug. 25 announce that net profit, net interest income and net commission income increased, while loan loss provisions declined, Haynes said.

The bank, which is cutting 500 jobs by 2013, is “close to finalizing” the terms with a new chief financial officer and will make an announcement by Aug. 25, Haynes said. Haynes has been CFO in addition to heading the bank, since being appointed chief executive officer in August of last year.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net

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