Hungary Mortgage Bank FHB Slumps After Police Search Offices

  • Hungarian police carry out searches at FHB, other locations
  • FHB says it acted lawfully and is cooperating with authorities

Shares in FHB Jelzalogbank Nyrt headed for their biggest weekly drop on record after police carried out searches at its offices in connection with suspected fraud, in the latest of a series of regulatory and legislative blows for the mortgage lender.

Hungary’s second-largest listed lender fell 4.3 percent to 517 forint by 2.14 p.m. in Budapest, extending this week’s rout to 27 percent. About 105,000 shares were traded on Friday, nearly five times the full-day average over the last three months.

Hungarian Police said late on Thursday they had searched FHB’s offices the previous day as part of an investigation that started in January. The Magyar Nemzet newspaper reported they also searched the home of FHB Chairman Zoltan Speder, who has a 24 percent stake in the mortgage lender via A64 Vagyonkezelo Kft.

FHB said it was operating in a lawful and prudent manner, and its management was acting in "full cooperation" with police, according to a statement published on the Budapest Stock Exchange website. The lender was informed of the investigation against "an unknown offender" this week, it said. The company’s press office declined to comment on the report in the Magyar Nemzet newspaper related to its chairman.

Savings Cooperatives

FHB’s slide started on Wednesday when Hungary’s government blocked Takarekbank, the umbrella bank for more than 120 mostly rural savings cooperatives, from acquiring a controlling stake in the mortgage lender. Takarekbank is majority-owned by a company that’s "closely affiliated" with FHB, according to regulatory filings. In a separate case related to FHB, the country’s financial regulator on Tuesday announced a 105 million-forint ($384,000) fine for misleading markets in relation to a Eurobond sale in 2012.

The lender said Friday it disagreed with the fine, on which it will seek a judicial review.

The mortgage company’s shares traded as high as 990 forint in 2014, amid bets its growing influence in savings cooperatives may boost its balance sheet. That alliance, which now includes state-owned development bank MFB and postal service Magyar Posta, has expanded its combined network to 3,500 service points in the eastern European nation.

Concorde Securities, Hungary’s largest brokerage, ended coverage of FHB’s equities last year, citing the difficulty of evaluating the impact of savings cooperatives in the lender’s fundamentals as one of the reasons. Equilor Befektetesi Zrt. and the Budapest-based brokerages of Erste Group Bank AG and KBC Groep NV have also ended coverage of the stock. All declined to comment on the latest developments when approached by Bloomberg.

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