June 1, 2017 / 11:54 AM / 8 months ago

UPDATE 1-Orban ally takes major stake in Hungary's MKB Bank

(Adds detail, analyst comment, market reaction)

By Gergely Szakacs

BUDAPEST, June 1 (Reuters) - Businessmen close to Prime Minister Viktor Orban have emerged as the biggest shareholders of MKB Bank less than a year after Hungary’s fifth-largest lender was privatised.

Holding company Konzum, partly owned by businessman Lorinc Meszaros, an Orban ally, said on Thursday it would acquire a 45 percent stake in MKB Bank by taking control of private equity fund Metis.

Konzum said it planned to buy a further 4 percent stake in MKB but did not say who from.

At 1144 GMT, Konzum shares traded 17 percent higher at 345 forints, off earlier gains of 20 percent. The Budapest blue chip index was up 0.8 percent.

Meszaros, mayor of Orban’s home village and a close friend of the prime minister, also has stakes in the media and energy sectors where the Hungarian premier wants to boost the influence of local investors. Meszaros owns 19.6 percent of Konzum.

The MKB deal fits into Orban’s drive to boost the share of local investors to more than half in the bank sector, a market dominated by foreign names such as KBC, Austrian Erste Bank and Raiffeisen or UniCredit and Intesa SanPaolo.

MKB, which was stripped of a large chunk of its distressed assets under central bank resolution, made a 12 billion forint ($43.84 million) net profit in the first four months of 2017, more than last year’s total net income.

Konzum will take over the Metis fund from private equity investor MINERVA, one of the three buyers that originally purchased MKB at its privatisation tender last year. The ownership structure of Metis had been unknown.

Konzum did not disclose how much it was paying for the Metis fund.

Orban’s ruling Fidesz party, which faces an election next April, had taken issue with foreign banks not providing enough credit to local firms as Hungary clambered out of the global financial crisis after 2010.

“I think the issue of Fidesz-linked crony capitalism is under-appreciated and when growth is as strong as it was in Q1 is brushed over by the market,” Nomura analyst Peter Attard Montalto said in emailed comments to Reuters.

Montalto said the government aimed to boost economic growth by keeping up credit expansion and locally-owned banks like MKB could help achieve this goal.

Hungarian businessman Tamas Szemerey, a cousin of National Bank Governor Gyorgy Matolcsy, who is one of Orban’s strongest allies, announced last month he was taking a 20.2 percent indirect stake in MKB.

MKB Chief Executive Adam Balog, a former state secretary at the Economy Ministry under Matolcsy and former deputy governor under Matolcsy at the central bank, took a 9.8 percent indirect stake. ($1 = 273.73 forints) (Reporting by Gergely Szakacs and Krisztina Than; Editing by Adrian Croft)

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