November 28, 2018 / 4:11 PM / 15 days ago

Hungary's MKB expects profits to slip in 2019 as it readies bourse listing -CEO

* Sees profit at about HUF 20 bln next year vs 25-30 bln in 2018

* No decision yet on exact timing, size of stake to be listed

* Rising capital to enable stronger credit growth from 2020

* MKB may expand in neighbouring countries at a later stage

By Gergely Szakacs

BUDAPEST, Nov 28 (Reuters) - Hungary’s MKB Bank anticipates a profit of about 20 billion forints ($69.6 million) in 2019, below that expected for 2018, as it prepares to end its restructuring with a stock market listing, its chief executive told Reuters.

MKB, Hungary’s sixth-largest lender by end-2017 assets, entered a European Commission-approved restructuring process in 2015 as Hungary stripped the then deeply loss-making bank of a large stock of distressed loans.

In return for 32 billion forints worth of state aid, the bank - since sold to private investors, including Lorinc Meszaros, an associate of Hungarian Prime Minister Viktor Orban - has been saddled with restrictions on its business activity.

These include cost restrictions and a dividend ban.

“Our final (cost-to-income ratio) target is 52 percent for next year, and we will definitely reach that,” Chief Executive Adam Balog said.

He said this year’s ratio could come in at about 55 percent, the higher end of a range set by the EU, as first-half spending was lifted by the shift to a new digital platform and payments linked to the spin-off of non-performing retail loans.

Balog said the bank would earn a profit of about 25-30 billion forints this year, a return on equity slightly exceeding 13-14 percent, while next year’s profit would be somewhat lower.

“It will be a similar year, with some downside risks,” he said. “We do not know how the interest rate environment will unfold.”

Balog said no decision has been made on the exact timing or the size of the stake to be listed on the Budapest Stock Exchange. Hungary is also expecting the privatisation of state-owned Budapest Bank.

Balog said MKB, which has a 7 to 8 percent share of corporate loans, would aim to cautiously increase lending to small and medium-sized businesses next year.

Looking beyond 2020, when MKB will exit the EU’s monitoring process, Balog said the bank would probably aim to boost lending in a “sustainable and cautious” manner.

MKB, which is banned from acquisitions until the end of this year, may look at possible targets in neighbouring countries at a later stage and any takeover would focus on players with a strong digital profile.

MKB competes in Hungary with OTP Bank, Austria’s Erste Group Bank and Raiffeisen, Belgium’s KBC Group and Italy’s UniCredit and Intesa SanPaolo. ($1 = 287.24 forints) (Reporting by Gergely Szakacs; Editing by Elaine Hardcastle)

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