BUDAPEST: Hungary's OTP Bank is in talks to buy two banks from foreign owners who plan to withdraw from the country's banking sector, OTP Chairman and CEO Sandor Csanyi said on Monday.
He also told InfoRadio that Hungary should cut its huge taxes on banks in the longer term or face economic stagnation and an exodus of foreign-owned banks who make losses.
"In one case we have already submitted a bid, not a binding one but a written bid, and in another case we are in the final stage of the talks," he said in an interview.
OTP is Central Europe's biggest independent lender, and the biggest commercial bank in the country where most banks are in foreign hands.
Csanyi said Hungary needed Europe's highest bank tax in past years to consolidate its state budget, but the government should cut the level which would otherwise keep lending low.
"In the long term these taxes are clearly anti-growth and that should be changed, otherwise there will not be sustained growth and then the budget consolidation happened in vain and will not be sustainable," Csanyi said.
The bank tax has been a key plank of the government's fiscal policy, which has helped it finance personal income tax cuts and cut the budget deficit to below the European Union's (EU) threshold, 3 percent of gross domestic product (GDP).
Prime Minister Viktor Orban has also said he wanted a rise in Hungarian ownership in the bank sector.
Csanyi said it was realistic to expect such a rise in the next years, and that could even benefit the economy as foreign-owned banks have cut their activity more since the 2008 global crisis than banks managed from within the country, like OTP.
"There are visible signs that some banks want to leave Hungary and these are not small banks," he said. "The question is who will buy these: another foreign bank which stays in Hungary or OTP or (state-owned development bank) MFB."
But the country will not be able to finance economic recovery if too many foreign banks withdraw, Csanyi said.
"The Hungarian bank tax is 15 times the EU (European Union) average... that cannot be sustained long or sooner or later banks who post losses quit from Hungary," he added.
He said OTP's ongoing talks about the two acquisitions could take 3 or 4 months, while it was not sure that OTP's bid would win as it had a conservative approach in pricing.
One risk considered is a possible further rise in the taxes on banks even though OTP thinks the government does not need that to keep the deficit below 3 percent, he said.
The government has grudgingly pledged to take new steps to persuade the European Commission that it can keep the deficit below the 3 percent threshold.
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