CEO of Hungary's Top Bank Vows to Buy Five Lenders by 2019

(Bloomberg) -- Hungary’s largest commercial lender is planning at least five bank takeovers in the next two years, seeking to profit from a wave of consolidation across the industry.

OTP Bank expects to see the share of group revenue generated from outside the country rise to 70 percent after the deals from about 45 percent currently, Chairman and Chief Executive Officer Sandor Csanyi said in an interview in Budapest last week.

While some European banks are struggling with new capital requirements, OTP said it’s been readying itself for two decades for the right conditions to take advantage of M&A opportunities. The Hungarian group, one of Europe’s best-capitalized banks, is using a $1 billion war chest to expand its presence in central and eastern Europe, weighing targets from Bulgaria to Belarus. The acquisition plans come on top of the three banks OTP has agreed to buy in the past year.

“In the next two years, we will buy at least five banks,” Csanyi said, without naming the potential targets. “We’ve waited for 20 years for this wave of banking consolidation in Europe. It’s finally happening now.”

OTP’s acquisitions helped its shares touch a 10-year high of 10,600 forint a month ago. The shares rose 1 percent on Monday to 9,990 forint by 2:39 p.m. in Budapest, headed for a gain of 19 percent for the year. The lender’s $10.6 billion market capitalization makes it Hungary’s largest company.

OTP was upgraded to “accumulate” from “hold” on Monday by analysts at Polish lender MBank SA, which cited the Hungarian bank’s acquisition plans for the move. It maintained the target price at 10,901 forint.

“Assuming the domestic business in Hungary generates stable results, the M&As can boost OTP’s revenues by as much as 65 percent according to our calculations, though not until after the acquisitions reach the target cost and revenue synergies,” MBank analysts including Michal Konarski in Warsaw said in the report.

Under Csanyi’s 25-year tenure, OTP has retained its pole position even after losing its monopolistic role with the end of communism, which allowed competitors to pour in from western Europe. Csanyi, 64, credits a “very conservative” approach for surviving turbulence that’s ranged from the conversion of toxic Swiss-franc loans to an onerous bank tax in Hungary, emerging in a shape fit enough to seek buying opportunities.

This year, OTP completed the purchase of Croatia’s Splitska Banka, a former unit of Societe Generale, and signed agreements to buy the Serbian and Romanian units of National Bank of Greece, which it plans to consolidate in the fourth quarter of 2017 at the earliest.

OTP executives have signaled that dividend will be influenced by the acquisitions, with a higher payout if the bank fails to spend the cash earmarked for expansion. OTP has said it may announce its dividend policy after publishing its third-quarter earnings.

--With assistance from Samuel Dodge and Piotr Bujnicki

To contact the reporters on this story: John Micklethwait in Budapest at micklethwait@bloomberg.net, Zoltan Simon in Budapest at zsimon@bloomberg.net.

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andras Gergely, Dale Crofts