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CIB Bank rejects state capital injection, MKB does not comment yet

CIB Bank does not need state capital support, therefore it will not apply for funding from a planned HUF 600 billion package for banks, CIB Bank president György Surányi told MTI.CIB Bank, together with OTP Bank and MKB Bank , were named by Finance Minister János Veres as eliglible for capital support from a €20 billion stand-by agreement with the IMF, the EU and the World Bank.

MKB Bank declined to comment on its plans before details of the support package are revealed. OTP Bank praised the banking package as a stabilizing factor, and said it would consider whether to participate if legislation was at place and details were known (see earlier item).

Surányi said that Veres likely mentioned CIB Bank among those that may apply for support, because the bank meets the technical requirement of having warranty capital of at least HUF 200 billion.

Surányi noted that CIB is 100% owned by Intesa Sanpaolo of Italy, which is one of the best-capitalized banks in Europe and stands with full responsibility behind its Hungarian unit. CIB has a capital adequacy ratio of 10%, while CIB group expects after-tax profit in excess of HUF 30 billion for 2008 after posting after-tax profit of HUF 20.4 billion in H1.

The planned IMF banking package is a significant stabilizing factor for the Hungarian banking sector as well as for OTP Bank, OTP Bank said, adding it will consider whether to participate in the program after legislative rules and details were known.

OTP added that its capital position is stable, its profitability is high, the quality of its loan portfolio is good and its liquidity is manageable.

OTP Bank said that the proposed banking package is adequate to enhance confidence in the sector, and “the earmarked HUF 600 billion (roughly $3 billion) package represents a significant stabilizing factor for the Hungarian banking sector as well as for OTP Bank.”

OTP Bank’s Board of Directors will consider the relevance of its participation in the program once the relevant legislation is in force and after reviewing the details of the implementation, the bank said, adding that a general meeting of shareholders is authorized to make the decision.

Veres said on Thursday that the three banks may ask to draw on the capital support until January 31, 2009, while financial market regulator PSzÁF, the Central Bank (MNB) and the Finance Ministry will decide together whether to grant the request. The aim of the capital support is to bring the capital adequacy ratio of the receiving bank to 14%.

If a bank's request is granted and its draws on the support, the state will take a non-voting stake in the bank, though it will get management rights. The support will be temporary, Veres said.

The ministry will submit a legislative package detailing the conditions for the bank support package by November 10, eres said.

The package will contain a HUF 300 billion guarantee fund to help banks to refinance themselves if needed, as well as a HUF 300 billion fund for raising capital. (MTI – Econews)