OTP Bank Agrees to Buy Axa Unit in Push to Boost Loan Volumes

  • Takeover to boost mortgage loan stock by up to 25%, OTP says
  • Axa to book 80-million euro exceptional loss on unit sale

OTP Bank Nyrt., Hungary’s largest lender, agreed to buy the local unit of Axa Bank Europe SA in an acquisition that would raise its mortgage-loan volume by as much as 25 percent.

The transaction, which includes the retail and corporate portfolios of Hungary’s 19th largest lender, will be closed by the end of the year, OTP said in a regulatory statement. Axa Bank will book an exceptional 80 million-euro ($87 million) loss on the sale, for which it set aside provisions in 2015, it said in a separate statement. No further financial conditions were disclosed.

The financial market in the eastern European nation is facing a government-led consolidation after the state purchased units of GE Capital and Bayerische Landesbank. Prime Minister Viktor Orban and the National Bank of Hungary are looking to fight credit contraction by raising domestic ownership in the industry and cutting Europe’s highest bank levy after the tax and losses on toxic foreign-currency loans dented profitability.

OTP Bank’s shares rose by as much as 0.8 percent to 6,050 forint and was trading at 6,011 forint at 10:14 a.m. in Budapest. The stock rose 57 percent last year, helped by the bank-tax cut.

"This is a step forward, albeit a small one, in the company’s acquisition strategy," Monika Kiss, head of research at brokerage Equilor Befektetesi Zrt., said by e-mail. "Challenges in the bank’s core operations as well as its Ukrainian and Russian units have limited significant progress." She has a buy recommendation on the stock.

OTP Bank said in October it was considering whether to acquire Bulgarian, Romanian and Serbian units of Greek banks.

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