Budapest's Power Banker
Is Sandor Csanyi too powerful? Some Hungarians think so. Csanyi is the chief executive and chairman of OTP Bank, far and away the dominant financial institution in Hungary. OTP holds 30% of all Hungarian deposits, makes 23% of all retail loans, has half of Hungary's fledgling mutual-fund business, holds half of all housing loans, and issues almost two-thirds of the country's credit and debit cards.
Csanyi has translated his potent financial power into an equal amount of political clout. No matter which party is in power, he always seems to have the ear of the prime minister. One of Hungary's wealthiest men, he has been known to rent whole restaurants to entertain his political friends in private. Warns Lajos Bokros, a former Hungarian finance minister and now a World Bank official: "It's just not good to amass such uncontrolled and unbalanced power in the hands of one CEO."
Csanyi, 49, dismisses the criticism of his influence with a shrug of his burly shoulders. "If I have strength," he says, "it's because we are successful." There's no doubt about Csanyi's success. OTP's profits over the past three years have risen by an annual average of 25%, to $292 million in 2002. Since its initial public offering in 1995, its share price has leaped 500%. Some 80% of its shares are now owned by foreign institutional investors.
The bank has succeeded in part because it had a big head start. It was the only retail bank in Hungary until 1987. Its branches were everywhere, and they were stuffed with cheap deposits. Still, when Csanyi took over in 1992, OTP was bloated and sluggish. By the mid-1990s, competing banks controlled by foreigners dominated corporate loans and were making inroads into OTP's other businesses.
So after the IPO, Csanyi modernized. From 1995 to 1999, he spent $100 million on info-tech upgrades, slashed 40% of the staff, and remodeled every OTP branch. "We reorganized everything about the bank down to the way the customer is greeted when they walk in the door," Csanyi says. While the competition fought over a lucrative corporate lending market, Csanyi played the long game, diversifying and cross-selling new services to existing customers. Now that the pack is turning its attention to retail banking, OTP is way out front.
But while Csanyi has been smart, he may also have help. According to the World Bank's Bokros, it was only because of Csanyi's connections that OTP was not sold to a strategic foreign investor like other banks. (Csanyi denies this.) Critics say those connections have also boosted OTP's bottom line. For example, Csanyi has done his best to make sure the government maintains a subsidy for mortgage loans, dominated by OTP. Under the scheme, the bank charges 8.5% to 9%, but the borrower pays perhaps 3% and the government makes up the difference to the bank. That not only makes every loan highly lucrative but also dramatically expands the number of borrowers. "It's a gold mine," says Libor Schlecta, director of financial institutions research for Fitch Ratings in Frankfurt. "It raises the question of whether [under the program] most of the subsidies are going to the bank or to the home buyers."
Investors aren't protesting. But some worry about what they don't know. Dimitri Chatzoudis, fund manager for ABN AMRO Eastern Europe Equity, which has 9% of its portfolio invested in OTP, complains that management is stingy with information. Some institutional investors worry that the board, made up mostly of Csanyi's associates, provides no independent review. Csanyi responds that "people who know our decision-making structure realize we have very good corporate governance."
Meanwhile, he's making plans to export his success. In 2001, OTP bought Slovakia's Investicna a Rozvojova Banka. This year it's bidding for Bulgaria's largest bank, DSK Bank PLC, and will also try to buy Hungary's Postabank, slated for privatization. The ultimate capitalist, or the ultimate insider? Sandor Csanyi may actually be both.
By Christopher Condon in Budapest