Release 15 May 2020

RELEASE

MTB and MBH Bank together establish a holding company

A banking group with the second biggest total assets may be established on the Hungarian banking market.

15 May 2020 - MTB Bank of Hungarian Savings Cooperatives Co. Ltd. (MTB) and MBH Bank Plc. (MBH) signed a letter of intent on the establishment of a shared financial holding company each party holding a 50 percent share therein. Magyar Bankholding Zrt. together with involved international consultants will be responsible for reviewing, analyzing, and preparing the framework according to which the new, joint banking group having a significant market power will be established exploiting synergies between the banks and the operational and cost optimization potential of their cooperation. MBH Bank and MBH with their 1.3 million customers, 840 branches, HUF 4300 billion total assets, HUF 2,600 billion credit volume and HUF 3,100 billion deposit volume would become the second largest organization on the Hungarian banking market.

The two groups of financial institutions will complement each other perfectly considering as well as their clientele, composition of their services and business focus. The mostly urban, more affluent clientele of MBH, with its private banking, corporate and leasing portfolio will be perfectly enhanced by the MBH Bank Group with its municipal relations and having clientele of retail customers from small towns and small settlements as well as agricultural and other small and medium-sized enterprises. The branch system and ATM network of MBH being present at key Budapest locations will optimally complement the unique market presence and extensive branch system and ATM network of MBH Bank Group in the rest of the country. As for their services, the loan products of MBH Bank Group designed mainly for micro- and small and medium-sized enterprises, and its unique constructions provided for the participants of the agricultural market, and its leading role as agent in the provision of state aids will be perfectly complemented by the private banking and Széchenyi Pihenőkártya service of MBH and its leasing constructions recognized in the market and its unique and corporate- and investments products.

In addition to the complementary clientele, product and service portfolio several costs, investment and synergy opportunities may open up before them. Considerable savings are achievable by the rationalization of the branch network, but same applies to the synergies of the support and back office departments. IT is one of the key areas of the operation of the banks. In the area of IT, the rationalization of functional cost, the developments and the systems and the operating costs are the greatest potential. Additional savings can be achieved in the field of investments and expert cots. Through their economies of scale and better bargaining power cheaper sources might be also available for the banks. Pursuant to relevant analyzes if the two companies merge partially or full by the exploitation of the income, cost and investment synergies and the rationalization of the parallel operations the operational costs can be gradually reduced in the medium term which can improve the competitiveness, the growth outlook, profitability and stability of the banking group while further developing the quality of its customer service.

The fusion of the domestically owned MBH Bank Group and MBH Group might have significant advantages for the Hungarian economy and the whole country. The Hungarian ownership may increase further in the banking system, the new economically dominant, market leading universal banking group can operate efficiently despite the more stressful market conditions which can provide stability and predictable liquidity for the Hungarian economy. Otherwise, the cooperation of the two banks may generate additional GDP growths.

Pursuant to the letter of intent the two banks establish a shared financial holding company entitled ‘Magyar Bankholding Zrt.’, each party holding equal share therein. The future CEO of the company is Mr. József Vida, who is currently the director and CEO MTB Zrt. (the central bank representing MBH Bank Group) the first members of the board are dr. Ádám Balog as director and CEO of MBH Bank Plc., dr, András Bencze and József Vida. The parties will submit their request for foundation license at the end of May 2020 to the National Bank of Hungary. The parties investigate the possibility of the entry of MBH Bank Plc into the integration of credit institutions.

„By the fusion of the two banking groups a universal commercial bank with the second biggest total assets in the Hungarian banking sector may be established, but its form is under investigation. We have to decide in the forthcoming months what serves our customers` interests more. If we create a single giant financial institution from the two banks or if we follow the example of the Volkswagen Group which produces Audi, Volkswagen, Skoda and Seat at the same time, however, for every market only the products that are most appropriate to the customer demand.” – said Mr. József Vida the future CEO of Magyar Bankholding Zrt. „We have a lot work to do in the upcoming period. The competition requires joint capital and expertise. We are convinced that the alliance being set up is able to support the challenges arising from the economic situation, the economic policy efforts of the government, the support of the Hungarian families and enterprises and the professional customer service.”

The past 5 years is one of the success stories of the domestic financial scene. Today, we have developed MBH into a modern, digital financial institution that works predictably and efficiently. We retained our customers and became successful in the client acquisition. Our solvency is great, in the past four years we doubled our solvency margin, we cleaned our portfolio, and we performed our undertakings towards EU. The bank, individually or by finding other paths, is ready to step up. In the past years I emphasized myself regularly that it would serve the interests of Hungary and the further strengthening of the domestic banking system if the Hungarian ownership ratio increases in the banking system and the number of the banks decreases. MBH Bank might be a suitable partner for the common thinking as our business focus complement each other. By signing this letter of intent, we will be able to examine each other and to accurately assess the possible synergies. I truly hope that we will find points of cooperation that will allow us not only to deepen our relationship, but to create far-leading new opportunities. – said dr. Ádám Balog director and CEO of MBH Bank Plc.

The strategic alliance serves the interest of the clients and the owners of the affected financial institutions and increase the market value of the banks and it also complies with the consolidation requirement prescribed by the National Bank of Hungary. The actual form of the cooperation, the possibilities of expansion, as well as the possible subsequent, partial or full, merger of the financial institutions will be decided on a later date with the involvement of prominent international consultants.

Background

The MBH Bank Group is one of the biggest banking group of Hungary and it is a key member of the Hungarian financial system. The members of the Group are MTB Bank of Hungarian Savings Cooperatives Co. Ltd. as integration business management organization, MBH Bank Zrt. is the universal commercial bank and MBH Bank Mortgage Bank Co Plc. as specialised credit institution and other companies and subsidiaries specialised in factoring, leasing, fund management, IT and other auxiliary financial services. Szövetkezeti Hitelintézetek Integrációs Szervezete (SZHISZ) having special licences inspects and supervises the prudent and proper operation of the MBH Bank Group.

MBH Bank Zrt as the legal successor of the Savings co-operatives is the universal commercial bank of the MBH Bank Group having national coverage and it is one of the biggest domestic financial institution which operates the biggest branch system in the country and it serves 1.1 million clients. It provides personalized, up-to-date and reliable financial products and services for the families, communities, companies, older and younger generations, residents in the cities and the rest of the country.

MBH Bank Plc.

70 years old MBH is the classic bank of the Hungarian financial system. As a result of the successful reorganization between 2015 and 2019 the operation, system of the financial institution follows the conditions and expectations of the EU. As a significant universal bank of Hungary MBH provides long-lasting value to its customers through its predictable partnerships. The bank set to dynamic development path and developed digital base and strategy has a traditionally strong corporate and private banking clientele, consulting and analytical skills. The core value of the financial institution is the professional customer service based on a prepared, supportive, honest professional work.