* MKB investment has cost 2 bln euros since 1994
* Hungary to pay 55 mln euros
* BayernLB to waive 270 mln euros in receivables
* Hungary sees deal as first step in sector consolidation
By Jörn Poltz and Krisztina Than
MUNICH/BUDAPEST, July 24 German state-backed
lender BayernLB is selling its Hungarian MKB unit to
that country's government, ending an ill-fated investment that
has cost it a total of 2 billion euros ($2.7 billion) in losses
over the last 20 years.
BayernLB bought MKB in 1994 as a way to expand its banking
business in fast-growing Eastern Europe. But Hungary's banks
were hit in 2010 by high taxes as the government sought to plug
a budget deficit. It also forced lenders to take losses on a
scheme allowing households to repay mortgages below market
rates. Budapest-based MKB lost 409 million euros in 2013 alone.
"We got off with a black eye," said Markus Soeder, the
finance minister of the German state Bavaria, which owns 75
percent of the lender, on Thursday.
The European Commission ordered BayernLB in 2012 to
restructure and sell some businesses as a precondition for
approving state aid for the German regional lender, which ran
into trouble in 2008 after risky investments turned sour.
Hungary will pay 55 million euros for MKB and in return
BayernLB will waive 270 million euros of receivables. This will
result in a 2014 net loss at the Munich-based lender.
Hungary for its part sees the MKB acquisition as the first
important step of a sector consolidation, Economy Minister
Mihaly Varga said.
Prime Minister Viktor Orban has said he wants more than 50
percent of the banking sector to be in Hungarian hands, hoping
that this will spur domestic lending.
Consolidation is likely also to be driven by a fresh
financial blow for banks in Hungary later this year from new
government measures to help borrowers, which could cost the
sector 700 to 900 billion forints ($3.1-$3.9 bln) in refunds to
clients for past interest rate and fee increases.
Foreign banks have been reducing their exposure to Hungary
of late and its central bank expects more to leave the country
However Hungary wants to own MKB only for a short period of
time, Economy Minister Varga said.
"Our hope is that MKB regains its strong, competitive
position within one or two years and thus it can be sold on the
market," he said.
Hungary's biggest bank OTP had also been in talks
with BayernLB on the asset, but was outbid by the state,
BayernLB Johannes-Jörg Riegler said.
Bavaria's Soeder said that the only remaining risk for
BayernLB was now troubled lender Hypo Alpe Adria, which BayernLB
sold to Austria in 2009 after only two years of ownership.
Austria aims to seize 800 million from BayernLB and the
country earlier this month passed a law on to ensure that Hypo's
investors help to pay to wind down a bank that has cost 5.5
billion euros in public aid so far.
($1 = 0.7421 Euros)
($1 = 228.2500 Hungarian Forints)
(additional reporting by Arno Schuetze in Frankfurt and Sandor
Peto in Budapest; Editing by Sophie Walker)