Hungary’s fourth-largest lender Takarek Group, which comprises the country's integrated savings cooperatives, approved a five-year strategy on November 30, paving the way for the merger of its units leading to the establishment of a universal bank. 

Analysts say that Takarekbank, state-owned Budapest Bank and MKB owned by businessmen close to the government could join forces in the near future to create one of the largest commercial banks in Hungary that could serve as a challenger to Hungary's largest lender OTP Bank.

Five years ago mortgage bank FHB and its chairman Zoltan Speder were entrusted with organising the integration of the country’s fragmented saving cooperatives, which enjoyed the backing of the government. Following several bankruptcies, the government overhauled the sector and injected HUF136bn (€421mn) capital to meet stricter European Union capital adequacy requirements and create synergies. The government received criticism for supporting saving cooperatives, creating an uneven playing field.

The network of savings cooperatives, which currently constitutes some 100 small local banks with more than 1,500 branch offices and over one million customers mainly in the Hungarian countryside, played an important role in the government’s push to have over 50% of the banking sector owned by Hungarians. Prime Minister Viktor Orban named banking, along with the media, retail, and energy, as one of the four key strategic sectors of the economy where local ownership should exceed 50%.

Formerly the deputy CEO of OTP,  Speder left Hungary’s biggest bank after 15 years in 2006 amid disputes with boss Sandor Csanyi. He bought a stake in FHB in 2007 with the aim of turning it into a new, strong financial institution. 

In the summer of 2016, the tide turned and Speder suddenly fell out of favour with Orban and the ruling party. The prime minister has a track record of falling out with his old friends and replacing them with new ones.

The chairman of Hungary’s second-largest listed bank came under a smear campaign by government-friendly media. Police raids targeted the offices of FHB and other business interests of the banker. Under pressure, in October of 2016, he resigned and sold almost all of his stakes in FHB and later he exited from his media empire.

FHB was pushed aside from its role of controlling the country’s saving cooperatives. Takarekbank, the central bank of the integration process, took over FHB in 2017 and delisted its shares from the Budapest Stock Exchange. The takeover enjoyed the support of the government, which wanted to speed up the reorganisation of the sector.

By the end of 2017, the consolidation of the sector was completed after the merger of small units into regional strongholds. Twelve regional savings cooperatives were formed with a stable financial background and a common IT network, and the product portfolio was simplified.

Last week parliament approved a bill that bill would give TakarekBank, the "central bank" for Hungaryʼs integrated savings cooperatives, further powers to decide on uniform products and conditions of service for all savings cooperatives. The bill would also broaden and simplify access to a central IT system that contains client and transaction information for the entire integration.

At Friday’s EGM, shareholders approved the merger of the group's 12 savings cooperatives, three banks limited by shares and Takarek Commercial Bank to a universal commercial bank by 2020. Takarek Mortgage Bank will remain a separate entity, undertaking solely mortgage bond issues and refinancing activities.  

Takarek Group aims to boost annual profit to HUF30bn by 2023 and take a 10% share of the market, it was announced. With HUF2.5 trillion in assets, it is already the fourth largest lender.

The establishment of a modern, universal bank, accessible across the country and active in the area of digitalisation is at the heart of the strategy, said Takarekbank chairman-CEO Jozsef Vida. 

The man behind Hungary's emerging new bank

Vida is a well-known figure in Fidesz business circles. The 45-year old has climbed the career ladder in the savings cooperatives world. In 2015, he became head of B3 Takarekszovetkezet, which was created after the merger of ten smaller savings cooperatives.

The lender has established an amicable business partnership with companies of Lorinc Meszaros, the Hungarian oligarch regularly named as a proxy for the prime minister, and in exchange Vida has been appointed to the leadership of various companies owned by the former mayor of Felcsut, Orban’s home village.

Investigative news site Atlatszo, citing insiders in the banking sector, said that it is more or less a done deal that Takarek Group will be turned into a competitor of Hungary’s largest lender OTP Bank.

This would be carried out by the merger with state-owned Budapest Bank and MKB, which is 49% owned by companies of Meszaros. CEO Adam Balogh, who also holds supervisory and board seats in many of Meszaros' companies, has a 10% stake in the bank while Tamas Szemerey, the owner of smaller lender NHB Bank, holds a 20% stake.

In the last six months, no details have emerged on the possible privatisation of Budapest Bank, but based on an agreement with the European Bank for Reconstruction and Development (EBRD), the government agreed to cede control of the tenth largest bank by assets by 2018 or 2019. The state acquired Budapest Bank from GE Capital for $700mn in 2015.