Hungary Selling OTP Bank Stake at Discount Sends Shares Sliding

Updated on
  • State asset manager auctions holding at 6.1% average discount
  • KBC Groep has a neutral rating on the lender's shares

OTP Bank Nyrt.’s shares slumped the most in five weeks after Hungary sold a 5 percent stake in its largest lender at a 6.1 percent average discount to the market price.

The stock fell 3.4 percent to 5,475 forint at the close in Budapest. State asset manager MNV Zrt. auctioned a stake at 5,322 per share, according to two people with knowledge of the transaction, who asked not to be identified because the details are private. The government sold more than 14 million shares in OTP, which was the biggest decliner on the benchmark BUX Index on Friday.

Trading volume in the lender surged to more than four times the three-month daily average after the auction, which took place on Thursday, drew bids amounting double the amount offered. The government acquired the stake in 2011 as part of a takeover of privately managed pension funds and sold the interest to boost a fund mostly used for investment in sport, tourism and state infrastructure.

Demand at the auction was a "positive sign," according to David Sandor, the head of research at the Hungarian brokerage unit of KBC Groep NV, who has a neutral rating on the stock. Since the lowest accepted price was 5,200 forint, the stock will probably trade "in a relatively tight range over the next few weeks," he said.

OTP Bank’s shares have rallied 44 percent this year, lifted by the government’s pledge to cut Europe’s highest bank tax beginning in 2016. The surge took the stock to levels last seen in 2011, which means the state would break even on the ownership when taking dividends into consideration, according to Norbert Harcsa, a trader at Ipopema Securities.

Nine analysts recommend buying OTP Bank’s shares, while eight have a hold rating and four say sell, according to data compiled by Bloomberg.