By Margit Feher
BUDAPEST--Austrian lender Raiffeisen Bank International AG
(RBI.VI) decided Wednesday against selling its unprofitable
Hungarian unit Raiffeisen Bank Zrt. for now.
"Over the last few weeks, RBI carefully reviewed the offers it
received for its Hungarian subsidiary. After comprehensively
reviewing the last offer, RBI decided, at present, not to pursue
the sale of the Hungarian subsidiary under the current conditions,"
RBI said in a release, without providing further details.
According to Hungarian press reports, the government had been in
talks with RBI about buying its Hungarian arm.
Hungary is not under pressure to buy any bank, Economy Minister
Mihaly Varga said on state television Tuesday night.
Raiffeisen's Hungarian unit, Hungary's sixth largest bank by
total assets, generated a net loss of 25.6 billion forints ($116.2
million) in the first half of last year due to provisioning on
possible losses mostly on foreign-currency lending to households
and on other bad loans, about the same amount of loss as a year
earlier.
Investors were watching the possible deal closely to see if
Hungary would inject capital into the bank after the purchase since
that may have tipped the country's 2014 budget. Hungary needs to
keep its budget deficit within the European Union limit of 3% of
gross domestic product to continue to receive vital EU funds. The
government projects the deficit was not wider than 2.7%% of GDP in
2013.
The purchase could have helped Hungarian Prime Minister Viktor
Orban, who is seeking re-election for a second term in four months,
deliver on his goal to return at least half of Hungarian banks back
to local hands. The purchase could have increased Hungarian
ownership in the banking sector's total assets to near 50% from 42%
at the end of 2012.
The sector is now dominated by foreign lenders, mostly from the
euro zone, after privatizations that followed the collapse of
communism in Central Europe in 1989. Most of Hungary's banking
sector is owned by foreign lenders including Italy's Intesa San
Paolo SpA (ISP.MI), UniCredit SpA (UCG.MI), and Belgium's KBC Group
N.V. (KBC.BT).
Four large banks owned by foreign parents may soon be on sale in
Hungary soon, Hungarian central bank Governor Gyorgy Matolcsy said
in December.
Hungary has been uneasy about its reliance on foreign funding
despite banks pumping capital into their Hungarian units to shore
up their finances. Banks channelled 1.37 billion euro ($1.86
billion) into their Hungarian operations in 2012, up from EUR695.8
million in 2011, accounting for the lion's share of the EUR3.76
billion foreign direct investment in Hungary in 2012.
Banks operating in Hungary have chalked up significant losses in
recent years primarily due to the Hungarian government's special
bank-sector taxes and a massive amount of foreign-currency loans
turning sour.
Hungary was to allow a small, partly state-owned bank Szechenyi
Kereskedelmi Bank Zrt. to practically re-nationalize Raiffeisen's
Hungarian subsidiary. The state holds a 49% stake in Szechenyi
Bank, which has only one branch office. The majority stake in the
bank is held by Hungarian firm T&T, owned by Istvan Torocskei,
who also heads the country's state debt management center AKK.
Szechenyi is one of the smallest banks in Hungary; its total
assets were HUF19.63 billion at the end of 2012, the latest date
for which data is available, as against the HUF1.867 trillion in
total assets of Raiffeisen's Hungarian unit at the end of June
2013.
Write to Margit Feher at margit.feher@wsj.com