Budapest Bank will be sold this year, although the Hungarian government has yet to decide whether it will offload the lender via an auction or initial public offering (IPO), CEO Gyorgy Zolnai told a panel discussion at the EBRD Annual Meeting on May 12.

“It’s definite that it will be sold back soon,” he said in answer to a question from bne IntelliNews. “We are in the beginning phase. We work to sell the bank this year. There is no deadline.”

The bank’s management is pushing for an IPO, having noted the success of the float of GE Money Bank earlier this month. Also formerly owned by US giant GE, the Czech lender has now been rebranded Moneta Money Bank.

GE sold Budapest Bank, Hungary's eighth largest, to the government for $700mn last year, as part of a drive by the US company to offload its financial assets and return to its industrial roots. Hungary had long said it wanted to raise local ownership of the banking sector, having blamed foreign-owned banks for risky foreign exchange lending in the past.

There was speculation that the government would merge Budapest with MKB, which the state took over from BayernLB in 2014, to build a domestically-owned banking champion, despite the different profiles of the two banks. Earlier this year, the pair was earmarked to IPO on the Budapest Stock Exchange as the stars of an effort by the central bank to revive the sleepy bourse, in which it took control in November.

Instead, the country's fourth largest bank was sold last month to investment funds allegedly owned by the country’s central bank. That transaction is now under investigation by the European Commission.

Agnes Hornung, state secretary at Hungary's economy ministry, said the government intends to sell Budapest Bank in an open process and no priority will be given to domestic investors. “State ownership in the banks will be reduced,” she said in answer to a question from bne IntelliNews.

Zolnai told the panel discussion that the Hungarian banking sector has turned the corner after a raft of new taxes, laws and rules that had pushed many of the banks into losses over the past few years. “There is light at the end of the tunnel,” he said. “We are in a new environment that is positive for banks and is stimulating growth.”

The EBRD has helped foster this new environment though a deal with the government and Erste Bank last year, in which Budapest agreed to cut the bank levy in return for the Austrian-owned bank redoubling its efforts to expand lending. As part of this truce, the government and the EBRD are due to complete a deal next month to each take a 15% stake in Erste’s Hungarian unit.

Graeme Hutchison, the EBRD’s local representative, said the development bank’s new strategy in Hungary would mean “the bank will be more active in equity investments, directly and through funds”. However, despite government approaches, the EBRD has refused to take a stake in MKB because of the opacity of its new ownership.

Hutchison said it would look at possibly investing in Budapest Bank. “As always we will take this decision on a commercial basis,” he said in answer to a question from bne IntelliNews.