Hungary May Link Sales of State-Owned Banks, Minister Says

  • Economy Minister expects to sell MKB, Budapest Bank in 2016
  • Cabinet sees Erste stake purchase completed unit by June

Hungary may combine the sales of two lenders the government has acquired from foreign owners, with the possibility of listing MKB Bank on the Budapest Stock Exchange, Economy Minister Mihaly Varga said.

The country is offloading its stake in MKB and Budapest Bank to meet the conditions of an international deal signed last year to smooth ties with the banking industry and help regain investment-grade status. The state’s purchase of a 15 percent stake in Erste Group Bank AG’s local unit, also part of the agreement, may take place by June, Varga said.

“One scenario in the case of the privatization of MKB Bank is also to do it via the stock exchange,” Varga said in an interview Wednesday. “We can’t exclude the option of putting our stake in Budapest Bank on the market along with the sale of MKB.” He didn’t elaborate on how the two sales may be connected.

Hungary’s central bank, in charge of restructuring the unprofitable MKB, is seeking to sell the lender by the end of June, having spun off MKB’s bad-loan portfolio into a separate entity in late 2015. Hungary bought MKB from Bayerische Landesbank AG in 2014, followed by the purchase of GE Capital’s Budapest Bank, as Prime Minister Viktor Orban sought to boost domestic ownership in the banking industry and spur lending.

The government wants to ensure that the European Bank for Reconstruction and Development, which agreed to purchase a separate 15 percent of Erste Hungary, won’t get a more favorable price than the government, Varga said.

“We are administering the final touches to the deal,” he said of the Erste transaction. “We finished the evaluation of the portfolio and we are now in price negotiations.”

Banking Levy

Orban’s government committed to lowering one of Europe’s highest banking levies starting this year and expects banks to boost corporate credit. The cabinet will evaluate lending trends by mid-2016 along with banks and will hold further talks with them if credit doesn’t expand, Varga said.

The government will also earmark 50 billion forint ($171 million) from European Union funds this year for state guarantees on corporate loans, approximately doubling resources dedicated to this program compared with last year, Varga said.

The move complements efforts by the central bank to boost corporate lending. The monetary authority is seeking to increase credit to smaller companies by as much as 10 percent a year via incentives as it works to ward off an economic slowdown.

The state, which has also sought to gain control in the energy sector, may buy further service providers to ensure low energy prices, Varga said. “I can’t exclude that there will be further acquisitions” as the government wants to strengthen the “non-profit” part of the energy industry, according to the minister.

Hungary has bought natural gas and electricity companies from EON AG, RWE AG, and Engie SA, formerly known as GDF Suez SA, as the state takes over energy provision for households.

Before it's here, it's on the Bloomberg Terminal.