May 4, 2015 / 10:18 AM / 5 years ago

Hungarian banks getting closer to selling property-backed loans -sources

* Deals in prospect worth several hundred million euros -sources

* Two big transactions could conclude within months

By Gergely Szakacs

BUDAPEST, May 4 (Reuters) - Several banks in Hungary are working on selling non-performing commercial real estate loans worth hundreds of millions of euros in the coming months, with at least two major deals now in the pipeline, financial industry sources said.

In total Hungarian banks hold around 800 billion forints ($3 billion) worth of such loans, which are weighing on their balance sheets and inhibiting fresh lending.

The central bank launched a vehicle of its own, MARK Group, to buy such distressed assets from the banks but has yet to do so and there are signs that yield-hungry foreign investors instead might step in now that market conditions are improving.

The gap on prices which prevented deals being done in the past has narrowed thanks to an improvement in the real estate market and after banks had to make more provisions against their bad loans following the European Central Bank’s asset quality review last year, the sources said.

“There are lots of international investors walking around town, looking at specific deals,” one of the sources said.

Top banks operating in Hungary include OTP Bank, Austria’s Erste and Raiffeisen, Italy’s Intesa SanPaolo and UniCredit and Belgium’s KBC.

Foreign investors, such as other banks and private equity funds, are mainly interested in big corporate loans backed by real estate with their main focus on Romania, Hungary and the Adriatic region, one of the sources said.

“There has been interest in such deals but the gap between what banks wanted for their assets and what the buyers were willing to pay was huge,” one source said.

“From the pricing side, demand and supply are getting closer,” he said. ($1 = 271.5 forints) (Editing by Greg Mahlich)

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