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INTERVIEW-Bank tax cut to help Raiffeisen turn profit in Hungary in 2016
February 12, 2015 / 3:01 PM / 3 years ago

INTERVIEW-Bank tax cut to help Raiffeisen turn profit in Hungary in 2016

(Adds CEO comments)

* Sees EBRD a guarantor of govt bank policy turnaround

* To refocus on corporate segment and affluent customers

By Krisztina Than and Marton Dunai

BUDAPEST, Feb 12 (Reuters) - A planned cut in Hungary’s windfall tax on banks will help the local unit of Austrian lender Raiffeisen Bank return to profitability in 2016 after substantial cost cuts this year, its chief executive Heinz Wiedner told Reuters on Thursday.

Prime Minister Viktor Orban, whose government has squeezed foreign banks since 2010 causing billions of euros in losses, offered to cut a special tax on banks on Monday as part of a deal signed with Erste Bank, and the European Bank for Reconstruction and Development. Hungary and the EBRD also said they will take a stake in Erste.

Wiedner said Monday’s deal could bring a “major improvement”.

“It will help banks return to profitability, including Raiffeisen,” Wiedner said. He said his bank’s windfall tax burden would fall to around 20 million euros next year from about 40 million now, reducing its fixed cost base.

Burned by unexpected costs in Ukraine and Hungary, Raiffeisen Bank International, emerging Europe’s number two lender, posted a preliminary 2014 loss of 493 million euros, and this week said it would sell operations in Poland and Slovenia.

Wiedner said Raiffeisen would not sell its local unit as it was committed to Hungary, where it opened its first unit in the region in 1987.

“Maybe because we’ve had so much trouble here we think it can only get better,” he said. “If the situation normalises Hungary is not such an unattractive market.”

While the bank will stay in Hungary, it will not expand in the mass retail segment where it has a market share of about 6 percent. It will reduce its network of 115 branches and focus on the corporate segment, where it has a market share of 11-12 percent.

“The backbone of (our plan) is the corporate business but also part of the retail business: SME customers and affluent customers,” he said.

Raiffeisen sees a growth in its corporate lending book and also plans to boost fee incomes as “the times of doing pure vanilla lending are over,” Wiedner said.

“We see a lending growth that could at least come to a bit higher than the normal GDP growth. So if GDP growth is 2 percent then I could see a lending growth in 3-4 percent happen in the corporate segment. In retail it would take longer.” (Reporting by Krisztina Than and Marton Dunai; Editing by Elaine Hardcastle)

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