February 9, 2015 / 9:51 AM / 3 years ago

UPDATE 2-Hungary, EBRD to buy stake in Erste's Hungarian arm

(Adds Erste, analyst comments)

* Hungary, EBRD seen boosting Erste's capital by 15 pct each

* Government, EBRD decline comment ahead of press conference

* PM Orban has pledged new deal with banks after heavy taxes

By Krisztina Than and Michael Shields

BUDAPEST/VIENNA, Feb 9 (Reuters) - Austria's Erste will sell a minority stake in its Hungarian business to the local government and the European Bank for Reconstruction and Development (EBRD) if Budapest adopts a more favourable policy towards banks, the lender said on Monday.

Hungary's government has levied huge taxes on banks since 2010, but has promised recently to recast its relations with the sector in exchange for more lending, which it needs to keep the economy growing at around 3 percent.

A deal with Erste, emerging Europe's third-largest lender, and the EBRD could be a step in this direction.

"If there is a change in the framework for the financial sector, we will invite both parties to invest in our local entity," said Erste spokesman Michael Mauritz, without elaborating.

Hungarian news website Portfolio earlier reported the government and EBRD would each take a 15 percent stake in Erste Bank Hungary via a capital increase.

The government and EBRD declined to comment ahead of a 1500 GMT press conference where Prime Minister Viktor Orban, Erste Group Bank Chief Executive Andreas Treichl and EBRD President Suma Chakrabarti will sign a document. No further details have been given.

Orban has moved to boost Hungarian ownership in the bank sector and taking a stake in Erste would fit into this strategy after the acquisition of two other banks.

Late last year he also said Budapest would soon sign a new deal to reduce burdens on the sector in return for more lending, while his chief of staff said there were talks over cooperation with Austrian banks.

"Some kind of 'new deal' that we have already heard about could be part of this story," said a banking sector expert, on condition of anonymity.

"A large share of the banking sector will be in state hands and the bank tax is still levied on 2009 balance sheet totals, so sooner or later it would have to be amended to better reflect the present conditions," the expert said.

Attila Gyurcsik, an analyst at brokerage Concorde, said that after the government's move to eliminate toxic foreign currency mortgages, there were fewer areas of confrontation with banks.

"So we think the Hungarian bank sector is facing a relatively good period," he said.

Gyurcsik said an open question was how Erste would use the fresh capital if the EBRD and the state inject money into the bank. Erste lost 228 million euros ($258 million) in Hungary in the third quarter.

As well as Erste, Hungary's top banks include home-grown OTP , Austria's Raiffeisen, Italy's Intesa SanPaolo and UniCredit, and Belgium's KBC.

$1 = 0.8848 euros Additional reporting by Marton Dunai and Gergely Szakacs; Editing by Jason Neely and Mark Potter

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