Economy 16 November 2023, 9:05am

After the Hungarian state, EBRD also sells its stake in Erste Bank Hungary

Portfolio

The European Bank for Reconstruction and Development (EBRD) is selling its 15% stake in Erste Bank Hungary back to the Austrian parent company after the Hungarian government's recent exit from the bank, a top EBRD official told Reuters.

Reuters pointed out that nationalist Prime Minister Viktor Orbán, who has been in power since 2010, has led a more than a decade-long campaign to bring Hungarian ownership in banking, media and the energy sectors above 50%.

However, Economic Development Minister Marton Nagy has recently flagged a review of non-strategic assets that could be sold as the cabinet aims to raise the required financing for the acquisition of Budapest Airport. Selling its 15% stake in Erste's local arm back to the Austrian parent, Erste Bank Group AG, for HUF 87.6 billion is part of the government's efforts to conjure up funding for the transaction.

Hungary is working with French infrastructure giant Vinci SA on a plan to buy Budapest Airport Zrt, Bloomberg reported earlier this week, citing people with knowledge of the matter. The Hungarian government has long been working to acquire the rapidly expanding airport, and several potential partners have been mentioned in the past.

Francis Malige, EBRD managing director of financial institutions, told Reuters late on Wednesday the investment had been designed to help the Hungarian bank recapitalise while supporting a positive relationship with the authorities.

"The government's recent exit from (Erste Bank Hungary) means that there is no more state ownership of subsidiaries of Western banking groups, which is good news for the sector's stability," said Malige.

"Our job as EBH's shareholder is done. We received a call notice from Erste last Friday and are proceeding with the sale of our stake to the group, based on terms agreed during our 2016 investment,

he added.

The deal was part of a landmark agreement between Orbán and local banks in the hope that a cut in a hefty bank levy would trigger an increase in lending to businesses.

Erste Bank Hungary has just presented its earnings figures for the first three quarters of 2023. Here are the highlights of that report:

after-tax profit reached HUF 89.9 billion in the first three quarters of the year, up from HUF 18.4 billion a year earlier, but excluding one-off effects the bank's profit would have increased by only 10% (without these, pre-tax profit would have been HUF 66.5 billion instead of HUF 60.5 billion);
operating income increased by 56% to HUF 225 billion, while operating expenses decreased by 2.5% despite inflation, but both would have increased by 13% without one-off effects;
cost-to-income ratio fell to 33% from 53%, the loan-to-deposit ratio rose to 72% from 59%, while the non-performing loan (NPL) ratio dropped to 2.8% from 3.0%;
the bank's total loans and bond stock increased by 6% year-on-year, , of which SME loans increased by 17%, large corporate and municipal loans were up 8%, while commercial real estate loans declined by 7%, reflecting the bank's deliberate retreat from the market to reduce risk;
new lending declined by 45% (54% for corporate and 32% for retail); new SME loans fell by 3%, large corporate and municipal loans by 75% and commercial real estate by 81%, the former supported by the Széchenyi Card and the Baross Gábor loan programme.
the bank's investment portfolio grew by 27%, while deposits decreased by 16%, bringing total customer assets to HUF 5156 billion at the end of September, up 10% from a year earlier.