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ent companies banks Fund managem

18-19

FINANCE

pump intense efforts to the central bank’s in Hungary so atmosphere and the boost lending to finally give An improving international showing stronger fiance sector seem picking up and the economy liquidity in the a merrier tune. With investments are switching to desperately needs. even the otherwise glum bankers prospect for growth,

FINANCE MARCH 14, 2014 – MARCH 27, 2014

VOL. 22. NUMBER 05

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EYES ON THE BRIGHT SIDE

Banks have felt that the government really has it in for them over the past few years, which was shown through waves of sectoral taxation that ate into the finance industry’s profits. In contrast, Citi’s new chief executive Aftab Ahmed believes things are heading in the right direction and the way is paved to grow the business as well as the overall economy. 12-13

NEWS

SPECIAL REPORT

SOCIALITE

Hopes on exports

A romance to last long

In motion

Hungary hopes to keep the momentum growing with the expansion of exports this year. The main thrust will remain Europe, despite the government’s commitment to drastically increase the share of other markets in overall volume terms. 03

Bye-bye bank deposits, hello funds! What at first looked like nothing more than a crush on the part of investors is now blossoming into a sweeping love story, with little apparent chance for an early break up. 14

The 15−year−old Compagnie Pál Frenák celebrates its anniversary with a sequel to Tricks & Tracks, a groundbreaking 1999 dance performance. Pál Frenák talked about generational differences and impacts on contemporary dance. 22-23

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Budapest Business Journal | March 14 – March 27

BBJ

3Special Private bankers face

new challenges

SPECIAL REPORT:

SUBSCRIPTIONS

Report

Lists: Commercial

banks Fund management

companies

18-19

FINANCE

pump intense efforts to the central bank’s in Hungary so atmosphere and the boost lending to finally give An improving international showing stronger fiance sector seem picking up and the economy tune. liquidity in the switching to a merrier With investments glum bankers are desperately needs. even the otherwise prospect for growth,

MARCH 14, 2014 – MARCH 27, 2014

VOL. 22. NUMBER 05

BUDAPEST B

BUSINESS JOURNAL HUF 1,250 | €5 | $6 | £3.5

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

EYES ON THE BRIGHT SIDE

Banks have felt that the government really has it in for them over the past years, which was shown through waves of sectoral taxation that ate into the finance industry’s profits. In contrast, Citi’s new chief executive Aftab Ahmed believes things are heading in the right direction and the way is paved to grow the business as well as the overall economy. 12-13

NEWS

SPECIAL REPORT

SOCIALITE

Hopes on exports

A romance to last long

In motion

The 15 year−old Compagnie Pál Frenák celebrates its anniversary with a sequel to Tricks & Tracks, a groundbreaking 1999 dance play. Pál Frenák talked about generational differences and impacts contemporary dance. 22-23

THE EDITOR SAYS

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HELD BACK IN DEVELOPMENT Politicians in the arduously assembled leftwing are rightfully feeling that no matter what they do, a new scandal, a new unwelcome blast from the past is waiting to jump out of the shadows at every corner. For the reigning right, things are simply looking too good to be true, because even for someone who thrives on Schadenfreude, the situation on the left is simply sad. As if all the polling numbers projecting another Fidesz victory with a supermajority weren’t enough, there’s the flak from the rehabilitation of the old guard, and even then there’s a new skeleton falling out of the closet every week. MSzP deputy chairman Gábor Simon faces prison for a hefty HUF 250 million that he parked abroad and can’t account for. If that wasn’t bad enough, it turns out he is also linked to the shady former owner of the putative Sólyom ‘national airline’ who had a dedicated safe for Simon and also procured false travel documents for him, certifying he is a citizen of Guinea−Bissau. Next, the release of János Zuschlag happens to come shortly before the 2014 elections and he is apparently very happy to discuss the past and the circumstances of his imprisonment for organized fraud back when he was a representative for the socialist MSzP. According to his new book, theft and corruption are widespread in the political sphere, he was paid off with money in a plastic bag and he is merely a scapegoat, taking the rap for all the other socialist figureheads who were also in on the scam. Even if not a word of what Zuschlag claims is true, many of the accusations ring true, they reaffirm perceptions of politicians and they are ideal for

re−tarnishing the image of the left, stoking an aura of corruption that it has at least partially deserved and that its opponents have been busy keeping alive over the past years. In a previous editorial, we pondered how deplorable it is that the best the opposition could offer the electorate was to reassemble the same old group of people, the same faces that Hungarian voters have already judged in 2010, and in no uncertain terms. All that the public wants, based on polls showing the majority is unhappy with the direction of the country, is a genuine and viable alternative to oust the Fidesz establishment. Instead, we only see a disheartening explanation for why there is no fresh political talent. Up and comers on the right have conceded to serving as ‘yes men’ in Viktor Orbán’s one man show. The left has the likes of Zuschlag, who is most upset for becoming a fall man for the crimes of many, not once regretting the millions he stole, saying it’s the way “things are done”. He now works for his own consultancy that, among other services, has the audacity to provide counsel for writing tender bids, seemingly oblivious to the fact that his years spent in prison for organized fraud might have smeared his track record in this area. The evolution of the Hungarian political establishment has stalled, which is fine for the right, as it is already settled into every aspect of public life and has also reshuffled the electoral system to make victory for anyone else not even an uphill, but vertical battle. For the rest of the country there is only hope that someone, somewhere, will pick up the slack.

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Hungary is concerned about the energy supply and independence of Central Europe and is asking the United States to lend a helping hand and accelerate the export of liquefied natural gas to its allies in the Visegrád region. In the realm of diplomacy, people are usually polite with one another but somebody had to have asked: are you people joking? The government first chains itself to Moscow by agreeing to accept a €10 billion loan for nuclear plant construction, becoming a political proxy for the 30−year loan period. Unsurprisingly, the United States, NATO members and European allies aren’t too happy that Vladimir Putin has found a backdoor into the West’s policymaking and can make its indirect influence known. This is a backdoor that Viktor Orbán willingly threw wide open, oblivious to the fact that it made Hungary an instant liability. Now, the Washington ambassador is among the signatories of the plea from the Visegrád countries asking the States to step up the export of its natural gas to its Central European allies. The letter claims that energy is a crucial everyday issue, not only for its significance to the public, but also in terms of “national security” and “geostrategic stability and independence”. The duplicity is mind− blowing. Orbán doesn’t seem capable of breaking his habit of making friends with all the wrong people at the worst possible time, and usually ending up with nothing to show for his troubles. Thoroughly antagonizing Brussels in the past years so as to avoid a few genuine reforms and respond to concerns

about the violation of constitutional boundaries has shaken Hungary’s international standing for years to come. The balancing act, increasing the weight of the East over the West, hasn’t exactly gone as planned either. In 2014 Armenia commemorates the ten−year anniversary of the death of Gurgen Margaryan, brutally murdered in Budapest by Azeri national Ramil Safarov. Hungary extradited Safarov to Azerbaijan on the premise that he would serve the entirety of his sentence there. Instead, he received a hero’s welcome, was pardoned and promoted, and Hungary got nothing for its troubles but the embarrassment that comes with being played. At the time, the government was seeking potential government bond purchases from Azerbaijan, which is why, to this day, the inexplicable extradition is linked to seeking Baku’s favor. No bonds were bought. Orbán decided to be friends with Russia this year, striking a deal over the Paks power plant. Just a month later, Hungary finds itself torn between allegiances, as Russian military forces have invaded and annexed a part of Ukraine. This is the same Russia that has its money−based claws firmly sunk into Hungary for decades to come, even as Ukrainian tensions have the potential to spark a catastrophic East−West conflict. It’s about time Hungarian diplomacy stopped shooting itself in the foot when it comes to making foreign trade calls. Some research or circumspection, which has been glaringly missing from these decisions, would probably help.

ORBÁN DOESN’T SEEM CAPABLE OF BREAKING HIS HABIT OF MAKING FRIENDS WITH ALL THE WRONG PEOPLE AT THE WORST POSSIBLE TIME

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New civil code

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Speaking of figures 07

macroscope

GOVERNMENT LEVELS GROWTH HOPES ON EXPORTS

GERGŐ RÁCZ

Hungary’s exports will expand by 2% to 2.4% this year and the country’s trade surplus will surpass €7 billion by the end of the year, Economy Minister Mihály Varga said, which means the latest trend in the expansion would continue. Figures from the Central Statistics Office (KSH) show Hungary’s exports grew by 2.2% in 2013 from the year before. Market analysts are now expecting the country’s overall economy to grow 2−2.5% this year from 2013, driven by manufacturing and agriculture and the absorption of products from these sectors abroad. The latest KSH figures underline the prospect that continued economic expansion would only come from Hungary’s foreign markets, since households still lack a critical volume of disposable income. The breakdown of the 2013 GDP figures shows that domestic consumption was negative in the first quarter and even in the ensuing expansion periods; the biggest increase of the year was 2.5% in the second quarter. The fact that domestic spending hasn’t picked up yet was also indicated by the December retail figures released by KSH, which showed that the sector expanded by only 1.8% despite the annual Christmas and New Year shopping boost. ALTERNATIVE MARKETS Another government objective Varga reiterated is the aim of increasing the share of exports to non−EU countries and regions from the current one−fifth of total to one−third by 2018. He stressed that, in addition to export market diversification, a government priority is to boost the proportion of exports by Hungarian SMEs by helping them to enter international markets. In particular, the government has its eyes set on Asia under its ‘Opening To The East’ strategy. To date, there have been limited results. Talks with China have

STORY HIGHLIGHTS ■

Hungarian growth expectations highly reliant on exports ■ Foreign trade dominated by Europe in spite of ‘Opening To The East’

mostly resulted in upping the activity of the Chinese administration in Hungary, but targeted at its own businesses. These materialized in financial support for chemical company Borsodchem, owned by China’s Wanhua. The latest round of bilateral talks has brought commitment from Bank of China to up its activity in Hungary, but mainly to better support its compatriot companies in the region. Other areas of outreach, like the controversial approach to Azerbaijan, have also yielded muted results. In fact, the extradition of Ramil Safarov, a convicted murderer, who was promptly pardoned, freed and feted as a hero once landing in Baku remains a major embarrassment for Hungarian diplomacy and the events have left a permanent blemish on relations with Armenia, the home nation of Safarov’s victim, Gurgen Margaryan. Of course, there is Hungary’s newfound affection for Russia, which was in stark contrast with the reigning Fidesz governments’ rhetoric. Signing the deal to commission Russia to implement the expansion of the Paks nuclear power plant happened just before President Vladimir Putin found himself at odds with the rest of the world over Russia’s actions in Ukraine and the possible breakup of the country.

Photo: Szilárd Koszticsák / MTI

Expectations that the Hungarian economy will assume a growth trajectory seems to be gaining support from the country’s main export markets also finding a more solid footing. However, the government’s embrace of the east hasn’t yet borne the hoped− for fruits, so the best hopes remain with the continued recovery of the European Union, and most especially Germany.

ECONOMY MINISTER MIHÁLY VARGA

STICKING TO TRADITIONS Although there is a separate office aimed at enhancing foreign trade relations with Péter Szijjártó as its state secretary, and despite his multitude of visits throughout the world, including many trips to the east and Middle East, there hasn’t been any notable change in capital inflows or a reshuffle in the composition of investors. The KSH figures show that 77.1% of Hungary’s 2013 exports were destined for EU countries, with more than 25% going to Germany. Although exports to China also grew by 6.9%, the €1.5 bln total is still

a comparatively small sum when weighed against the established markets. Accordingly, the government will be keeping its eyes on its traditional and most significant market, the European Union, even as politicians bad−mouth the bloc. The projections here are favorable. The European Commission expects growth to pick up in the eurozone, with the currency bloc’s economy growing 1.2% in 2014 and 1.8% next. More importantly for Budapest, Germany, Hungary’s biggest trade partner, is expected to grow 1.8% this year and 2% next, after a modest, 0.4% expansion in 2013.

THE GOVERNMENT WILL BE KEEPING ITS EYES ON ITS TRADITIONAL AND MOST SIGNIFICANT MARKET, THE EU, EVEN AS POLITICIANS BAD-MOUTH THE BLOC

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IN BRIEF

Budapest Business Journal | March 14 – March 27

I pulled out and got HUF 50 million in a plastic bag Former socialist MP János Zuschlag, reminiscing about the circumstances leading to his prison, which ended earlier this year

Authorities have arrested Gábor Simon, former deputy chairman of the opposition socialist MSzP. The politician rose to infamy in February when it was revealed he held HUF 240 mln in an Austrian bank account without any explanation about the origins of the sum. Authorities have linked Simon to Tamás Weisz, until recently involved with the putative Sólyom Hungarian airline. Apparently, Weisz oversaw a safe dedicated to Simon and he also assisted in getting the politician fake passports.

ECONOMY CITY SEES SOFT CPI LIKELY PROMPTING MORE MNB EASING Hungary’s much softer−than− expected consumer inflation is likely to encourage the central bank to soldier on with its easing cycle, even though inflation is now set to accelerate on the back of base effects, London−based emerging markets economists said after CPI data for February was released. Year−on− year headline inflation rose 0.1% last month, considerably south of the consensus. Forecasts in an Econews poll conducted in the City had varied in a relatively wide range from 0.2% to 0.6% after an already much lower− than−expected 0% headline print in January. Economists at JP Morgan said that the February inflation figures “clearly support” the MNB in its bias to continue monetary policy easing. “We remain of the view that the MPC will lower the policy rate to 2.5% (by) two more 10 bp cuts in March and April.” London−based economists at Goldman Sachs said the base effect of the first round of utility price cuts in 2013 has now started to support the headline number, and “we expect annual inflation to accelerate from here”. BIGGER SME LOAN STOCK CONTRIBUTES TO GDP GROWTH A 3% increase in SME lending stock in both the second and third quarters of last year may have contributed 0.3 of a percentage point to GDP growth, National Bank of Hungary managing director Márton Nagy said in an interview published in the online edition of business daily Napi Gazdaság. The MNB assumes every

one percent increase in corporate lending stock adds 0.2 of a percentage point to GDP growth, Nagy said. If the trend continues, the effect could be repeated in the ﬁrst and second quarter of this year, contributing 0.6 of a percentage point to GDP growth in a year, he added. INTERNATIONAL RESERVES DROP €324 MLN IN FEBRUARY Hungary’s international reserves stood at €33.788 bln at the end of February, dropping €324 mln from a month earlier, preliminary data published by the National Bank of Hungary (MNB) shows. The reserves were just €5 mln higher than at the end of 2013. They were down €2.109 bln from their level a year earlier. There was no FX government bond issue or redemption in February. The reserves rose €330 mln in January despite the redemption of a €1 bln government bond on January 29. The big 12−month drop came from a high base, boosted by the issue of $3.25 bln in government bonds in February 2013. Last year, the international reserves rose to nearly €36 bln between February and May before dipping under €31 bln on the advance repayment of the remainder of Hungary’s 2008 IMF loan in August− September. They ended the year at €33.8 bln, at practically the same level as at the end of 2012.

DOMESTIC EU GAINS POPULARITY IN HUNGARY The Hungarian public sees the European Union more favorably than before and its institutions are trusted above the European average,

Numbers in the news

15% of Hungarian employees plan to make new hires in Q2, and 6% plan layoffs, a fresh survey by Manpower shows.

502 permanent residency bonds (a special Hungarian government bond that accelerate applications for permanent residency by foreign nationals) were sold by the end of February, government debt management agency ÁKK said.

according to Eurobarometer’s latest Hungary report seen by MTI. According to the survey, 35% of Hungarian respondents had a positive view of the EU as a whole as against the European average of 31%. Concerning conﬁdence in European institutions, 47% of Hungarians said they “tended to trust” them, compared to 31% across the EU. Thirty−three percent of Hungarians ranked the free movement of people, goods and services to be the most important achievement of the EU, and peace among member states came in second with 27% of the answers, compared to the average in the EU, which ranked peace ﬁrst with 32% of respondent, and the single market second with 29%. EU GRANTS OBSTRUCTED BY BUREAUCRACY There is a chance that Hungary will be able to call only half of its allotted HUF 2 trillion in European Union grants this year, the hvg.hu news portal reported. The calculations are based on reports from businesses claiming that the state administration of the grants is working inefficiently, preventing the quick management of the process. Some of Hungary’s grants are also under investigation for anomalies in the allocation process. HUNGARIANS DISAPPOINTED BY HEALTHCARE Every second Hungarians thinks the quality of healthcare services has deteriorated in the past year, according to a survey by Medibon. hu. Respondents said there are long waiting lists for a number of examinations, while even though it should be free, several services are still seen as costly because of the money doctors expect to receive, although it

was made illegal. Given the option, the majority said they would rather seek out private clinics if they needed to see a doctor.

POLITICS ORBÁN: HUNGARY “NOT PART OF UKRAINE CONFLICT” After days of challenges from opposition party candidates to make an official statement on the uprising in Ukraine, Prime Minister Viktor Orbán finally did so on February 4: “Hungary is not part of the conflict” was the resultant sound bite headline picked up by most international press after answering local media questions following a visit to Kőszárhegy. Orbán went on to promise that “Hungarians are safe [‥.] in Transcarpathia, and the Hungarian Government is doing its utmost to ensure that they remain safe.” AUTHORITY REJECTS QUERIES INTO ELECTION FRAUD The national election office NVB has refused to take action in some 300 cases related to charges of election fraud, claiming it has no jurisdiction in the matter. The new election system being put into practice for the first time this year allows voters to recommend multiple candidates to be added to the ballot. Many small parties are accused of abusing the system and forging existing recommendations with the hope of getting substantial state funding once they raise a national list. The scam is basically a sure thing, since authorities can’t investigate by randomly asking citizens about whether they actually made a recommendation or not, since political preferences are confidential.

Photo: Tamás Kovács / MTI

AUTHORITIES ARREST OPPOSITION POLITICIAN

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Budapest Business Journal | March 14 – March 27

COMPANY NEWS

UK Minister for Trade and Investment Ian Livingston and Hungarian National Development Minister Zsuzsa Németh have inaugurated the British Business Center in Budapest. The center will further strengthen trade ties with the UK, the seventh−biggest investor in Hungary.

TAKATA LAYS CORNERSTONE OF €68 MLN AIRBAG PLANT IN HUNGARY

German carmaker Audi’s unit in Hungary generated revenue of €5.588 bln last year, up 5.8% from €5.282 bln in 2012, data announced at Audi’s base in Germany reveals. Audi Hungaria’s investments came to €968 mln in 2013, down from €1.038 bln in 2012. Last year, Audi completed a €900 mln plant at its base in Győr that will turn out A3 Sedan models. The car is the ﬁrst Audi is making entirely in Hungary. Engine production generated two-thirds of revenue last year. Production of four-cylinder petrol and diesel engines dominated. Audi Hungaria chairman Thomas Faustmann said that output of the unit goes into all Volkswagen group brands. In terms of volume, most output went into the A3 Sedan last year, he added. Audi Hungaria said in January that engine output at the base rose by about 10,000 to 1,925,636 last year. It said 42,851 vehicles rolled off the assembly line last year, almost 28% more than in 2012. Headcount at the end of 2013 reached 10,337, up more than 19%. Audi Hungaria HR director Erzsébet Knab said the unit’s workers would get a proﬁt-sharing payment equivalent to 1.7 times their monthly salaries in May.

Photo: László Beliczay / MTI

AUDI HUNGARIA REVENUE CLIMBS ALMOST 6% TO €5.588 BLN

Japan’s Takata has held a ceremony to lay the cornerstone of a €68 mln airbag and car safety systems plant in Miskolc (northeast Hungary). CEO Shigehisa Takada said Hungary was chosen as the site of the plant from several alternatives because of its developed infrastructure, strong industrial background, availability of skilled workers and good technical universities. The plant will employ 1,000 people, he said. Prime Minister Viktor Orbán said the project was the biggest greenfield investment in Hungary since German carmaker Daimler completed a plant in Kecskemét (central Hungary) two years ago.

Hungarian oil and gas company MOL is still in the running for DEA, the oil and gas production unit of German utility RWE, Reuters said, citing people familiar with the matter. BASF’s oil and gas exploration unit Wintershall, Russian tycoon Mikhail Fridman and Hungarian oil and gas group MOL are all still in the race, the newswire said.

Hungary’s Magyarmet Finomöntöde has set up a joint venture with German peer innocast to bring cutting-edge technology to the local precision casting industry, business daily Napi Gazdaság said. The technology will allow the JV, called alphaMet, to produce custom-made parts immediately,

In spite of a decline in last year’s consolidated profit, OTP Bank still expects to pay shareholders a bigger dividend this year than last, chairman-CEO Sándor Csányi said after the lender published its Q4 earnings report. OTP has significant liquid reserves, Csányi said, and the bank continues to be on the lookout for possible acquisitions. The bank’s liquidity reserves exceeded €6 bln at the end of 2013.

South Korea’s Wooshin Medics will build a €6 mln pharmaceuticals plant and research and development laboratory in Székesfehérvár, CEO TackSoo Nam said in Budapest. The investment will create 50 jobs. The plant is expected to start operating in 2015. South Korean companies had invested more than €2 bln in Hungary.

Hungarian property developer TriGranit, Europa Capital and Polish state railways PKP have sold their shopping and entertainment center in Poznan to Resolution Real Estate Fund IV and ECE Prime European Shopping Center Fund, TriGranit said. It did not disclose the price of the transaction, but put the value of the investment at €385 mln, including improvements made by businesses with leases. German-owned automotive industry supplier Poppe+Potthoff Hungária has completed a HUF 3.9 bln expansion at its base in Ajka, the company told MTI. Poppe+Potthoff Hungaria won a HUF 1 bln grant from European Union and state funds for the investment. The investment will raise headcount at the base to 350 from 300. U.S. consumer goods maker Procter & Gamble has inaugurated a HUF 20 bln disposable diaper plant in Gyöngyös. The plant will employ 150 people. The company already employs 800 people at a plant on the outskirts of Budapest. Venture capital fund manager PBG FMC has signed an agreement to provide more than HUF 500 mln in resources within two years to Traction Labs for the support of startups, the company told MTI. Hungarian IT company Albacomp RI Rendszerintegrációs has said it will set up a HUF 1.5 bln innovation center in Székesfehérvár. The company won a HUF 850 mln European Union grant for the investment. Albacomp RI will build a 4,000 sqm office building and production hall by the end of 2014.

Austria’s Jugend und Familiengasthauser (JUFA) is building a HUF 1.5 bln hotel and campground near the Vulkan spa in Celldömölk, business daily Napi Gazdaság said. JUFA is building a HUF 1.1 bln hotel with 33 rooms, supported by a HUF 240 mln European Union and state grant. It is also building a HUF 383 mln, 74-site campground. Shares of Hungary’s FHB and alternative energy company PannErgy will be included in the Vienna Stock Exchange’s CECE-Index from March 24, business daily Napi Gazdaság said. The bourse will publish new CECEIndex values on March 19. The inclusion in the index earlier of insurer CIG Pannónia and property management company Appenin raised the price of both shares, the paper noted. Belgian-owned Hungarian Sinia furniture maker Bútorgyártó has laid the cornerstone of a HUF 1.9 bln plant in Batonyterenye. Sinia Bútorgyártó won HUF 640 mln in grant money from the European Union and HUF 113 mln from the state of Hungary. The investment will create 150 jobs.

Correction In our February 28 issue we published a table with

A consortium of Közgép Építő- és Fémszerkezetgyártó and Duviép 2000 has won a tender to build a waste management facility for communities south of Lake Balaton with a bid of HUF 2.64 bln, the latest issue of the Public Procurement Gazette shows. The winners beat another consortium, whose members’ names were not included in the announcement.

the article ‘Survival of the cheapest’. The title for the table correctly reads as Range

„Hanami” Japanese Drum Concert

CONCERT 4. April 2014 8:00 p.m. ŗ Bakelit Multi Art Center 1095 Bp., Soroksári út 164. ŗ Ticket: TAIKO Hungary

TASTER COURSE – for beginners 12. April 10 a.m. to 12 p.m. ŗ 1045 Bp., Berni u. 1.

of standard net translation

WE MAKE YOUR EVENT MEMORABLE BY A DYNAMIC DRUM SHOW!

rates (HUF/character).

info@taiko-hungary.hu t +36 30 222 9761

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Budapest Business Journal | March 14 – March 27

RISKS AND SIDE-EFFECTS OF EXECUTIVE LIABILITY FACE-LIFT Stricter times lie ahead for executive officers as a result of new liability regulations in the Civil Code that enter into force on March 15. Proactivity and precaution will be required to avoid having to rely on good liability insurance. LEVENTE HÖRÖMPÖLI-TÓTH

LESS RISK, MORE FUN Tax advisors draw attention to a higher level of risk-taking that management executives will face. “These risks may be managed through insurance agreements concluded for the benefit of the individuals in question. However, the tax consequences of such benefits depend on the actual agreements: whether the contracted party is the individual or the company and whether the insurance premium can be allocated to each individual, or there is a group of executives who are covered by the contract,” László Soós, senior tax manager at Deloitte Zrt said. “If the contracted party is the individual there might be options to reimburse the insurance premium tax-free; otherwise, these fees are taxable either at the company’s or at the individuals’ expense,” Soós added. László Szűcs, attorney-at-law at Réti, Antall & Partners PwC Legal emphasized the necessity to work out special procedures and easy-to-record decision making mechanisms. “Their purpose is to define to what extent executives may be exempt from liability or how liability can be pushed onto others in case they make their decisions in tax matters on the basis of professional advice.”

STORY HIGHLIGHTS

CIVIL CODE TRANSLATOR 2.0

■

Management executives will be subject to more stringent liability rules ■ Much greater awareness and precaution will be required in top-level corporate decisionmaking

The current government is fond of relying on symbolic tools. Nothing else can explain why the effective date of the new Civil Code is March 15, the anniversary of the 1848 revolution for Hungarian independence against Austria. The law supersedes its predecessor, which had been in existence for around 55 years, and promises to be revolutionary in many ways. PRIVATE ASSETS IN GRAVE DANGER One of the key novelties is the incorporation of the company act into the code. From now on, liability issues pertaining to management executives are regulated here. And those at the top of the company food chain had better be prepared. For one, they now need to watch out for their liability

The EU Chief Section of the Hungarian Ministry of Public Administration and Justice (KIM) and OFFI have launched a new pilot project together. They have organized a special team specifically for the continuous translation of new laws and other pieces of legislation. Their first big project, the translation of the new Hungarian civil code is coming to its end. “The Ministry of Public Administration and Justice wishes to offer a new service to those segments of the Hungarian public administration which apply Hungarian law to foreigners and foreign clients. We think that foreign companies operating in Hungary will benefit greatly from the new service; those who wish to start new enterprises in Hungary will also feel raised by executives should management colleagues follow a line of action that

Ratio of provisions affected by amendments

25% 42%

Completely new Amendments on the merit Unchanged

33% Source: OptiJUS legal database

towards owners. “Exemption will be more difficult. On the other hand, the obligation to pay damages shall remain limited up to the extent to which they were foreseeable. Such liability for breach of contract has been construed by the courts in a stringent way anyhow; lawmaking has only adjusted to real life conditions,” Dr. István Szatmáry, senior legal counsel at Horváth & Partners DLA Piper, told the Budapest Business Journal. There’s more uproar around damages caused to third parties in the capacity of acting as an executive. In such a case, the party suffering the loss now seems to have the choice now to go after the company and the executive, whose private assets will be accountable. “It is hotly disputed in what cases the joint and several liability could be applied,” Szatmáry said. “If a strict stance is taken by the courts, more cautious decision making could become the norm.” But too much risk could also push talented people in top corporate positions to take a different career path, which would be an unfortunate outcome. NO ROOM FOR SHY GUYS The overly passive should be aware too. A new provision requires objections to be

causes damage. The same principle applies if orders come from the owners to carry out such measures. “Failure to express an objection may result in ADVERTISEMENT

greater confidence toward the country if the current Hungarian laws are accessible in English,” Endre Gáspár, senior officer at the EU Section of KIM explained to the Budapest Business Journal. The novelty in the project lies in the fact that a constant team of translators, whose joint work will ensure the consistency of legal terminology, will translate Hungarian legislation. “So far, Hungarian laws have always been translated on an individual basis whenever it was necessary. The work was always done by outside teams of translators, non−affiliated with the public administration; it remained the ministry’s task to harmonize their diverse terminologies with one another in the end,” Gáspár added. AZs accountability of the ‘passive’ executive if the damage could have been prevented,” Szatmáry added. This fact raises specific concerns for foreign high−level staff not present in Hungary throughout most of the year. Preparation strategies should focus on raising awareness of the substance of the amended rules, and the continuous consideration of every possible consequence of each decision. Liability insurance is bound to gain in importance. KEEPING YOUR EYES OPEN Other obligations are also triggered by the entry into force of the new Civil Code. Company documentation prepared under the former Code will need updating and since parts of the law will come into effect gradually, a close follow−up is needed. “Even years on, the old Code’s rules will apply in certain cases. This transition period requires extra attention on the part of companies as well as counsels,” Szatmáry said.

ESSAY CORNER

IS THERE A FUTURE FOR THE BSE AFTER THE DELISTING OF EGIS? The answer is as straightforward as it is simple ‘Yes, there is!’ and for many reasons. First of all, the stock exchange has always been a good diversification tool for every investment portfolio, be it professional and/or retail clients. Stock exchanges can contribute to the transparency of the equity−investment. Secondly, the stock exchange is the ideal place to support the need for cap− ital in the further growth of the SMEs. The stock exchange certainly has its place in government policy for the intensive support of the SMEs. Thirdly, the ‘Fund for Growth Program’ of the Hungarian National Bank helps in the first phase of the financing needs of the SMEs. However, the next step in further growth could be a listing on the stock exchange and/or a capital increase through the stock exchange. Which could in turn create a higher liquidity on the market, enhanced transparency and higher interest from investors. Even after the delisting of EGIS, the BSE has an important and complimen− tary role to play in the further support of the SMEs and, by extension, the local economy. It is in the lifecycle of a successful company that after the initial growth period, the capital market supports further growth through IPO/SPO. And the examples for this are multiple: Google; Facebook; Apple‥. It is natural that once these companies are also successful on the stock exchange, they might become delisted. According to our experiences, these companies need help in every phase of their life cycle from raising additional equity through the stock exchange to helping the interested buyer to delist the stock and, as in Eddy D’Hertoge the case of EGIS, also let the small investor take part in the success of the company. CEO, KBC Securities Hungary

THE BSE HAS AN IMPORTANT AND COMPLIMENTARY ROLE TO PLAY IN THE FURTHER SUPPORT OF THE SMES AND, BY EXTENSION, THE LOCAL ECONOMY NOTE: ALL ARTICLES IN THE ESSAY CORNER SECTION ARE CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y.

News 07 MACRO Speaking X of ﬁgures The Budapest Business Journal presents the most important macro data of the past fortnight.

2.7% GDP growth in Q4, up from 1.8% in Q3, the Central Statistics Office said in a second reading.

0.1% February 12−month CPI, up from 0% in January. In a month−on− month comparison, consumer prices rose 0.1% in February after rising 0.3% in January.

6.1% year−on−year industrial output rise in January. Output growth slowed from 6.8% in December.

HUF 402 bln the amount foreign investors reduced their holdings of forint−denominated government securities within the first two months of the year.

Sources: Central Statistics Office, Government Debt Management Agency

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Budapest Business Journal | March 14 – March 27

BBJ

2Business Insight

PHANTOM PHARMA IN UNORTHODOXIA Since 2011, the Hungarian healthcare administration has introduced several unorthodox methods in order to keep the medicinal support budget in balance. The struggle to “contain the profit hunger of big pharma” has proven to be all too successful: dumps of low−cost generic drugs are prone to disappear suddenly from the market, meaning the security of the medicaments supply could be jeopardized. ANDRÁS ZSÁMBOKI

The Hungarian medication authority (GyEMSzI−OGyI) regularly publishes an updated list of drugs in short supply. At the moment, the list features nearly 450 medicines, surely far too much, especially if you consider that in 2011 there were fewer than 100 kinds of drugs enumerated. “Most items featured on GyEMSzI’s list are generic brands, many of them are the cheapest in their agent/active substance category,” Tamás Paál, senior consultant of OGyI explained to the Budapest Business Journal. “There are 142 items whose market share had not reached 1% in their active agent category before they disappeared for a good. The latter group might well be called phantom drugs,” Paál added. But why do cheap phantom drugs appear at all in the Hungarian market? The problem is rooted in unorthodox measures the Hungarian government began to introduce back in 2011 to curb the “outrageous” profits of big pharmas. THE PUNISHMENT STRIKES BACK The measures included the replacement of innovative drugs with generic ones, the contesting of generic drugs containing the same agent/active substance, and blind tenders for the cheapest reference drug status. All these have reduced the expenses of the medicaments budget by about HUF 31 bln since 2011. As a result, the turnover of Hungarian innovative drugs manufacturers has decreased, but the profit of generic drugs

STORY HIGHLIGHTS ■

Replacement of innovative drugs with generic forms combined with state-induced price competition have reduced the expenses of the medicaments budget by about HUF 31 bln since 2011 ■ Unorthodox measures in cutting healthcare subsidies help Asian manufacturers dumping their generic surplus stock on the Hungarian market

manufacturers has significantly fallen back as well. The main beneficiaries of the restrictive government measures have become those generic drugs distributors who have managed to sell the cheap products of Far Eastern and other Asian manufacturers on a one− time basis on the Hungarian market. The stocks of these distributors, however, are easily exhausted; after they dump their limited supply of goods at a depressed price on the market, they do not ensure a smooth follow−up flow. AS IT WAS IMAGINED BY HEALTH ADMINISTRATORS The introduction of the 2011 regulations was in many ways a response to the extreme expansion of the medicinal market during the previous years. Between 1999 and 2009, the consumption of medicaments increased about threefold which put an extreme burden on the Hungarian health care budget. To prevent a further increase in pharmaceutical subsidies, the healthcare administration facilitated the replacement of original, innovative drugs whose licenses had expired with cheaper generic drugs. “The stronger competition is among generic medicaments, the lower manufacturers’ prices will become; state subsidies are calculated relative to manufacturers’ prices,” a source who did not want to be identified told the BBJ. At the beginning, the rule followed by the state−run healthcare system was that the first subsidized generic variant had to be 65% cheaper than the original medicament it had replaced. Subsequently introduced generic drugs had to be priced even lower. In that system, however, price competition gradually decreased over time. This is why the concept of the so−called preferred reference range was introduced. Groups of medications were defined by the active agents they contained, and, within each group, the cheapest medication available on the

Hungarian market became the reference drug for the group in question. Only the ‘reference range’ would be subsidized by the state; that is the cheapest generic drug in the group plus those that are less than 10% more expensive than the cheapest. Those medicines in the group that were priced higher than the reference range received only limited subsidies; and those which were more than twice as expensive as the reference range were delisted. LIKE IN A POKER PARTY At the heart of the new policy, subsidization preferences were combined with the announcement of tenders, in which drugs were competing for first− place reference status in the first round, and for being included in the reference range in the second round. In the case of these tenders, competitors cannot see each other’s prices; this is why the process is called blind bidding,” Péter Paplanos, director of Teva’s public relations said. In this system, however, the initial conditions of manufacturers increasingly determine their later chances in each successive round of the competition. “Firstly, higher manufacturing costs put some of producers at a disadvantage right at the start. Secondly, blind tendering affects the extent of available state subsidies, so the more expensive medications will loose further competivity because they will receive less (or no) state subsidy. Thirdly, pharmacies and doctors are obliged to call their patients’ attention to the price differences and are expected to recommend cheaper drugs to patients,”

György András Deák, managing director of Zentiva Hungary told the BBJ. “The state−induced competition created among generic medicaments fits tightly into the current trends of unorthodox Hungarian economic policy,” Deák said. “Each element of that competition exists in the practice of other countries as well; but this combination, made even more restrictive by the extremely rigorous requirements set up by the government, is unique to Hungary.” Since 2011, the expenses of the medicaments budget spent on subsidies have decreased by about HUF 31 bln; patients have saved another HUF 7.5 bln by buying cheaper medication. These achievements, however, have had negative side effects as well. “Prescribing dump−sold Asian medicaments to patients is often hazardous on a log−term basis,” a source who asked not to be named told the BBJ. “By the time they get used to a certain medicine, the drug vanishes from the Hungarian market,” he added. Domestic generic pharmaceutical manufacturers have found themselves in a desperate situation. “We cannot compete with the low wages of Indian manufacturers,” Zsuzsa Beke, public and governmental relations manager of Gedeon Richter told the BBJ. “We have suffered huge losses amounting to several billion forints as a consequence of blind bidding. We have been forced to withdraw many of our blockbuster products from the market, or to sell them on the verge of profitability. Within Richters’s total income, domestic sales have sunk below 10%,” Beke concluded.

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2 Business

Budapest Business Journal | March 14 – March 27

RealEstate

OFFICES PLACE THEIR HOPES IN SSCs Shared service centers are one of the key niches of the Hungarian economy that is rapidly developing and holds even more prospects for growth. The trend is just what the doctor ordered for Budapest’s troubled office market, where simple stagnation has been a goal to aspire to in the past years. GERGŐ RÁCZ

Hungary, and most especially Budapest, is maintaining its appeal among companies establishing their shared service centers in the country, mostly due to the wide availability of a skilled workforce that knows foreign languages and, even more importantly, can be employed cost effectively. Some 90% of the centers active in Hungary have ADVERTISEMENT

achieved the business targets laid out when settling here, and 68% said they are planning to expand, a recently published survey from consultants EY shows. Given the potential in the sector, the state has also picked up on the trend and adopted a more active role in the promotion of Budapest as an SSC venue. The Hungarian Investment and Trade Agency is currently supervising 25 projects that may result in the creation of further SSCs in Hungary. The government estimates these ventures will create 7,000 new jobs. While all the related trends are favorable, there are still challenges that companies and the state have to keep in mind to keep the momentum going. “Competition remains intense, and it isn’t enough to convince service centers to come to Hungary, we also have to keep them, make expansion more appealing for them,” state secretary in charge of foreign trade relations Péter Szijjártó said. The biggest concern in this respect is ensuring a continued supply of qualified workers, added EY head István Havas.

OPEN FOR BUSINESS Besides the workforce, Budapest is also tempting in terms of office costs, which are the lowest in the region. “The SSC segment could become one of the pillars of demand in the coming years, since these companies account for a substantial volume” said Melinda Kovács, leasing manager at Skanska Property. “These centers have prognosticated further growth for the coming years, which makes the SSC sector even more attractive to developers,” she added. Developers aiming to attract SSCs must mainly focus on the costs aspect, creating accommodation with the lowest expenses for the businesses that come. Although development activity has been very muted on the office market in recent years, even before that new ventures were launched with the incorporation of environmentally friendly features to keep maintenance and operating expenses at a minimum. Also, Kovács added, designing the facility should be done with regard to the

fact that employees will predominantly be from a younger generation who favor a ‘campus style’ arrangement with community spaces and services as well as easy access to public transportation. Kustánc noted that the best way the state could serve the business sector is to digitize systems within the bureaucracy that involve tedious matters like the issuance of permits. Such solutions, for instance, could mean an electronics registry of people entitled to legally represent various companies as well as commissions transferring jurisdictions for specific cases. The earlier system required several stages of documentation and since these papers continue to exist, they created the grounds for abusing legal powers. The business sector would also benefit greatly from extensive use of certified digital signatures that verify credibility while also making administration easier. Two ministries are already using such a system and officials say the rollout will continue across other departments.

10 2Business // IT, Telco

Cloudgazing

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Budapest Business Journal | March 14 – March 27

The Budapest Business Journal’s new column about IT and telecom focuses on the new developments in the tech sector, on the rapid change in services, and the transition to the cloud. It explores how businesses are using the channels already available to them. It appears in every second issue.

REBOOT FOR GOVERNMENT IT The government has completed its ambitious goal of creating a comprehensive, cloud−based state infrastructure system. The message is that of all−around success, although the first major failure in the operation shows there are still some kinks in need of correction. GERGŐ RÁCZ

February marks the conclusion of the project known as the ‘government cloud’, a HUF 2.85 billion IT development program fully funded by the European Union. The government announced on February 21 that the project has succeeded in replacing outdated technologies and unsafe operating capacities had been replaced by more efficient and more secure alternatives. “We have concluded a long process, that was followed by a consolidation, which in turn paved the way for extensive developments,” Vilmos Vályi−Nagy, the state secretary in charge of government IT development, told reporters. The bill that laid out the terms of national data wealth protection was drafted in 2010 and still serves as the basis for the operation of the agencies and state institutions involved. The purpose of the strategy passed at the time was to regain state supervision

STORY HIGHLIGHTS ■

Gov’t completes centralization of state IT network ■ Problems persist surrounding launch

over various tasks involving data that had been outsourced under previous governments, Vályi−Nagy said, including sensitive digital material like programs and source codes. OUTSOURCED, INSOURCED Vályi−Nagy stressed that the venture’s strategic goals were also necessary since the pre−2010 governance had led to a chaotic situation in the services provided to support government IT procedures. The campaign also allowed the launch of multiple streamlined solutions that create for more efficient operation of the state computer infrastructure. The ‘insourcing’ effort fits in perfectly with the Fidesz government’s approach of removing as many of the functions crucial to the operation of the state as possible from the market, and preserving or establishing central supervision. Previous governments opted for a different approach. There was even a ministry at one point to oversee the rollout of digital technology in the country. Vályi−Nagy added that the changes over the years have created widespread confusion about propriety rights for software and technology that are important to the operation of the state. SCREWS LOOSE The centralization plan hit several obstacles during its implementation. While the ministry is heralding the

revenues generated from electronic road tolls, it should also be noted that the project was months behind its original launch date. Arguably, this was because the original deadlines made for an unrealistic timeframe. Most recently, the state’s computer systems made headlines when the new digital election system collapsed on the very day of its formal launch. Because of

DIGITAL DISCOUNT According to the National Development Ministry, the state spent an annual HUF 100 billion on IT services in the past, which has been reduced by 30% or HUF 30 billion as a result of the government cloud venture. The system is connected to 3,000 points within the state bureaucracy and another 5,000 points in education facilities. Thanks to the rollout, the ministry calculated that it was also able to reduce the expenses of landline phones by 40%.

THE ‘INSOURCING’ EFFORT FITS IN PERFECTLY WITH THE FIDESZ GOVERNMENT’S APPROACH OF REMOVING AS MANY OF THE FUNCTIONS CRUCIAL TO THE OPERATION OF THE STATE AS POSSIBLE FROM THE MARKET

the failure, the national elections office NVI had to revert to an earlier system to print out the registration forms for candidates entering the upcoming general elections, reported the Index.hu news website. Index said that there had been forebodings of trouble ahead of the launch, since the related hardware was late to arrive in many cases and there were also problems regarding configuration of the HUF 1.5 billion setup. Head of the NVI Ilona Pálffy later dismissed the report, saying there were no hang−ups in the administrative process and that everything worked fine, despite a leaked letter to the contrary. Nonetheless, the events have sparked criticism of the government’s centralization drive. Hungary is by no means unique in having problems when it comes to comprehensive computerization efforts. One of the most prominent and persisting stories in the United States is the failure of the state to process war veterans’ welfare applications. The issue is caused by a lack of compatibility between the affected institutions’ computer systems, which means there are thousands of paper−based applications that aren’t getting processed. The Veteran’s Affairs office is also receiving criticism for delays on the issuance of various health supplements as well as data breaches that are being perceived as signs of faulty IT infrastructure and the lack of related competences.

BBJ

3Special Report Private bankers face new challenges

Lists: Commercial banks Fund management companies

18-19

FINANCE An improving international environment and the central bankâ€™s intense efforts to pump liquidity in the finance sector finally seem to be giving lending in Hungary the boost it so desperately needs. With investments picking up and the economy showing stronger prospects for growth, even the otherwise glum bankers are switching to a merrier tune.

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Budapest Business Journal | March 14 – March 27

EYES ON THE BRIG H Even as the finance industry is struggling to fend off the effects of adverse operating conditions in Hungary, Citi’s Budapest business boasts continuing growth. The Budapest Business Journal spoke with the recently appointed chief executive Aftab Ahmed about his impressions of the country’s economy and his expectations of the future. GERGŐ RÁCZ

You became chief executive at Citi’s Budapest division just a few months ago. What are your impressions of the country and its economic situation so far? A: The economy performed well in 2013 with strong progress being made in improving GDP growth and maintaining the current account surplus. The favorable outlook for the economy is supported by the improvement in most macroeconomic indicators. Export performance was strong, leading to a large trade surplus. The manufacturing sector has done well and is projected to continue to do well based on an improvement in demand in Hungary ’s key export markets.

Hungary is often criticized for its adverse tax environment, in particular sectoral taxes on the finance industry (among others) that is inhibiting lending. How do these conditions affect you? A: We are not aware of any client exiting the market as a direct consequence of the tax environment. We, in addition to being comfortable with the environment, continue to view Hungary as an important growth market.

What are your expectations for Hungary in 2014? A: The macroeconomic scorecard is good and is on a path to move onto an even stronger footing with gross domestic product growing by approximately 2% to 2.5% this year. Several important sectors of the economy performed well in 2013, like manufacturing, exports, auto, food and beverages, logistics and warehousing, agriculture and construction. Hungary also has other factors that position it well for growth, e.g., its proximity to key markets in the region and strong

STORY HIGHLIGHTS ■

Citi expects favorable developments in the macro economy to continue ■ Targets growing all business segments in 2014

infrastructure in terms of logistics and transportation. There are already some 71 service centers that operate here and this number is projected to grow as Hungary, in addition to being a hub for innovation, has high availability of qualified, bilingual resources.

How did Citi fare in the past year? A: It was a good year as we achieved strong results in all our core businesses. We are amongst the top five most profitable banks in Hungary and in the top three in terms of liquidity. Additionally, we are the number one securities dealer in the market. I would also like to highlight that we have no exposure to foreign currency denominated mortgage loans. Our goal for 2014 is to continue to grow the franchise.

Aftab Ahmed has lived and worked in 10 countries during his 30 years at Citibank, during which time he has held numerous and varied executive positions. His fields of expertise include business banking, corporate banking, correspondent banking, consumer banking, distribution and Treasury. Before taking lead of Citi in Budapest, he was country Head for Egypt. Ahmed holds an MBA from Tulane University.

What is your strategy for growth? Would you be interested in buying out one of your troubled international peers if they were ready to exit Hungary? A: Our growth plans involve organic growth with a strong focus on growing our involvement with our existing customer base, in addition to acquiring new clients. Our growth aspirations will be achieved through leveraging our core strengths and our global footprint. We are strongly committed to digital technologies as we believe that digital

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Budapest Business Journal | March 14 – March 27

EXPERT OPINION

WE, IN ADDITION TO BEING COMFORTABLE WITH THE ENVIRONMENT, CONTINUE TO VIEW HUNGARY AS AN IMPORTANT GROWTH MARKET will be key to serving our customers in the future. We were voted the best Internet bank in Hungary, we are market leaders in credit cards and Euromoney ranked Citi Hungary as the leading provider of wealth management products and solutions.

You mentioned good relations with the regulators. Are you participating in the central bank’s ‘Funding for Growth’ program? What is your impression of this scheme? A: Citi is an active participant in the ‘Funding for Growth’ program and the booking quota assigned to us last year was fully met. SMEs are the backbone of the economy, and supporting this segment is important.

What are your main goals with Citi in Hungary? What do you plan on doing differently than your predecessor? A: We have a successful franchise in Hungary, and my plan is to continue to build on our successes. We have a very strong team and the goal is to leverage the team, our comprehensive product set, robust platforms and global network to build strong relationships with existing and new clients. We will continue to focus on productivity, our talent and strong operating controls. Another priority is to retain our market leadership in credit cards, fixed income trading, debt capital markets and Internet banking. We have a service center in Budapest that already employs approximately 1,000 people and given the growth prospects and the high availability of skilled labor, I can see that number increasing in the future.

Gergely Szalóki Head of Banking & Finance SCHÖNHERR HETÉNYI ATTORNEYS AT LAW

Hungarian legislation has changed its position on the concept of trust. The new Hungarian Civil Code, which enters into force on March 15, 2014, will recognize the concept of trust generally and also provide specific rules for the security trustee structure. But it might take years until Hungarian courts establish interpretative practice thereon. THE CURRENT SITUATION UNDER HUNGARIAN LAW If a syndicate of banks provides funds to a debtor, the security trustee, being a member of the syndicate, usually holds in trust the security interest(s) established over the assets of the debtor on behalf of the other syndicate members. So far, the implementation of this structure has been difficult under Hungarian law. WHAT IS THE PROBLEM WITH SECURING SYNDICATED LOANS UNDER HUNGARIAN LAW? Security interests in Hungary are generally subject to a registration requirement. However, as Hungarian law does not recognize the concept of trust, the trustee cannot hold the security interest on behalf of other syndicate members; i.e. only the trustee becomes secured. One obvious solution would be registering all syndicate members. But this is burdensome since every time one of the syndicate members change the relevant registry must be notified. This creates a very inflexible structure: clearly not what the parties want. Registering only the trustee is the other option. But this gives rise to other concerns, as such security interest (due to their accessory nature) would cover only the individual claim of the trustee (since only the trustee is registered); the claims of other syndicate members remain unsecured. Using a parallel debt structure, which is widely known in international financing, might also be an option, but the recognition of this structure is not yet tested in Hungary. Such abstract debt might raise public policy concerns in Hungary. SOLUTIONS SO FAR Beside the above mentioned parallel debt structure, one solution was getting

around the general accessory nature of security interests. The independent mortgage, which is very similar to the accessory mortgage in practice, is non-accessory (similarly to the German Grundschuld) and thus not tied to the underlying claim. So the whole debt may be secured, just by setting out the secured amount equaling thereto, and only the trustee of the syndicate is registered as security holder. Still, some minor problems remain since only the trustee is deemed secured under Hungarian law. The other syndicate members will have no in rem right over the encumbered assets. Another way of pooling security, although this solution is not widespread in Hungary, is when the trustee issues a bank guarantee in favor of the syndicate members, which secures the individual claims of each member. In turn, the security interest provided by the debtor secures the indemnification claim of the trustee under the bank guarantee. However, this solution is rather limited by the cash flow and the solvency prescription of the trustee. SECURING SYNDICATED LOANS WILL BE EASIER IN HUNGARY As of March 15, the syndicate may appoint in writing any person or entity, either among themselves or an unrelated third party, as security trustee. Such appointment must be registered in the same registry as the security interest. So only the trustee will be registered as the holder of the security interest. Nevertheless – and contrary to the current rules – the security interest will cover the entire claim of the syndicate, and the members of the syndicate will have in rem right over the debtor’s assets. However, only the security trustee may exercise the rights stemming from the security interest. The enforcement proceeds, once collected by the security trustee, are not deemed as part of the assets of the security trustee. Thus, the creditors of the security trustee may not seek satisfaction from the enforcement proceeds even in an insolvency proceeding. By recognizing the concept of trust, the new Hungarian Civil Code will end the development of ever more creative solutions when it comes to securing syndicated loans. Although it will generate less work for banking lawyers, they widely welcome the new set of rules on the security trustee structure.

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NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

HT SIDE

WILL SECURING SYNDICATED LOANS BE EASIER IN HUNGARY?

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Budapest Business Journal | March 14 – March 27

A ROMANCE BOUND TO LAST LONG

LEVENTE HÖRÖMPÖLI-TÓTH

The relationship between investors and funds has been getting romantic for two years now. And separation will remain way out of sight if money keeps flowing at the current rate. Total fund assets in Hungary grew by 35% in the last 12 months, bringing the magic HUF 5,000 billion mark within reach. January was so intensive that the second largest monthly capital influx of the previous four years was recorded. The backdrop to the phenomenon is a crusade by the National Bank of Hungary (MNB) against the base rate, which was slashed to 2.7% in February. No wonder bank deposits have lost their flair. SHORT OF FORESEEABLE SHOCKS However, threats to the stability of the national currency and domestic growth perspectives might reverse the rate cutting trend that surely has an effect on the investment landscape. “We don’t expect a dynamic cycle of rate increases in the next two to three years since inflation should stay at a low level. Unexpected negative events may have an impact on the rate curve, but even that

STORY HIGHLIGHTS ■

Fund investments likely to remain popular as the chances are slim that the base rate will go back up again signiﬁcantly ■ Strategies targeting absolute returns look forward to gaining ground further

ABSOLUTELY PROMISING Funds are gathering an ever−larger fan base in spite of the fact that investments are made on the basis of past returns, with no guarantee of similar future performances. Often lavish fund management fees don’t seem to scare away interest, either. “As long as the low and declining base interest rate remains, and together with it the low interest on bank deposits, investment funds can continue to offer competitive returns,” Komm added. Bond and absolute return funds collected the most take up during the previous year. The latter type now has the third biggest slice of the total investment fund asset pie. One reason may be that it is more immune to the declining base rate. “Whereas the performance of bond funds is essentially up to the change in general returns, that of absolute return funds depends on the efficiency of the investment strategy due to the wide scope of investment options available under this scheme (bonds, foreign exchange, commodity market, stocks, long−short trade investments),” Equilor explained. LIMITS AND POTENTIALS Trends underline a growing demand for the kind of active strategies that absolute return funds are also guided by. “I expect

MNB base rates (%) 7 6.755

6.55

6.25

5.25

5.755

5.55

5.25

4.755

3.5

4.55

4.25

4 3.8 3.6 3.4 3.2 3 2.855 2.7

1.75 0 Au g2 Sep 012 t2 Oc 012 t2 No 012 v De 2012 c2 Jan 012 2 Feb 013 2 Ma 013 r2 Ap 013 r2 Ma 013 y2 Jun 013 e2 July 013 2 Au 013 g2 Sep 013 t2 Oc 013 t2 No 013 v2 De 013 c2 Jan 013 2 Feb 014 201 4

The hype around investment funds is growing by the month. As the National Bank of Hungary shows no intention to slow down its base rate cutting cycle, the good mood of fund managers can be taken for granted for a long time to come.

Total assets of funds in Hungary (HUF bln)

5000

3750 3412 3280 3336

3543 3657

3847

3971

4617 4433 4535 4297 4340 4116 4131 4206

4785

2500

1250

Fund type share of total assets (%, as of January 2014)

5 should not push fund investors to sell in big numbers,” Equilor Fund Management said in a statement to the Budapest Business Journal. The question is: where lies the tipping point at which money will start flowing back to the safe haven of bank deposits? According to Tibor Komm, CEO of CIB Fund Management that critical landmark should lie at around 6−7%, but getting back there is not expected. “Even a bigger base rate increase of 2−3% from the currently very low levels would not propel bank deposit returns up into the skies,” Komm said.

to see such risk−managed funds gain further ground, primarily due to the promising return potential,” Komm added. Another recent hit, protected funds, don’t offer such a hectic pace of advancement. “They should remain popular in the long−term, but I don’t count on the fact that the previous growth rate could be maintained, partly because of its already high level of penetration,” Komm noted. In turn, funds issued in foreign currencies or those specializing in certain fields of the bond market might see an upsurge in popularity.

3 00 34

7 9

10 11

Money market Bond Absolute return Protected Real estate Balanced / Hybrid Equity Private equity Other Commodity market Derivative

Sources: BAMOSz, National Bank of Hungary, portfolio.hu

THE QUESTION IS WHERE THE TIPPING POINT LIES AT WHICH MONEY WILL START FLOWING BACK TO THE SAFE HAVEN OF BANK DEPOSITS

Oc t3 1, 2 012 No v3 0, 2 012 De c3 1, 2 012 Jan 31, 201 3 Feb 28, 201 Ma 3 r3 1, 2 01 Ap 3 r3 0, 2 013 Ma y3 1, 2 013 Jun e3 0, 2 013 July 31, 201 Au 3 g3 0, 2 013 Sep 30, 201 Oc 3 t3 1, 2 013 No v3 0, 2 013 De c3 1, 2 013 Jan 31, 201 4

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Budapest Business Journal | March 14 – March 27

PRIVATE BANKERS FACE NEW CHALLENGES In the changing business environment private banking clients have been seeking to further diversify their assets geographically. GABRIELLA LOVAS

Nowadays, private bankers and their clients face new challenges regardless of where they are based. The two main trends that affect international private banking are related to the changing relations and attitudes of policy makers, financial institutions and clients. Since the Cyprus crisis, the relationship between bank deposit holders and the state has changed for good. The other relationship, which has undergone fundamental changes is that of banks and the state. Governments will not rush to save troubled banks at any cost any more. Bail−outs will be accompanied by bail−ins, when creditors have to bear some of the burden of a bankruptcy. Both Hungarian and international private banking clients responded to the changes by further diversifying their assets geographically, rather than keeping them in a couple of accounts. Under the European Union’s Deposit Guarantee Schemes, for instance, depositors benefit from a guaranteed coverage of €100,000 per depositor per bank in case of bankruptcy. In Hungary, the most influential recent developments include the signing of the Foreign Account Tax Compliance Act (FATCA) with the United States and the growing number of double taxation treaties. However, as Blochamps Capital CEO István Karagich points out, there is a huge gap between the government’s communication about these agreements and the actual achievements. While there is no doubt that these agreements provide a solid basis for later developments, the government did not have enough ammunition to achieve everything it promised in early 2013. Hungary and the States signed an agreement in February 2014 to implement the Foreign Account Tax Compliance Act (FATCA), which targets tax evasion by U.S. taxpayers who use foreign financial accounts. After signing the agreement, state secretary Gábor Orbán said that it “helps us to combat tax avoidance through its provisions on reciprocal information exchange.” Although the deal is described as reciprocal, Karagich sees considerable imbalances, as the obligations of the Americans are marginal compared to that of Hungary. Although Hungary signed a treaty with Switzerland in September 2013, the Swiss parliament has yet to ratify it. In addition, the scope of the treaty is limited in several areas. A common misunderstanding, according to Karagich, is that the Swiss banks will provide comprehensive information about their Hungarian customers. Instead, the local tax authority

Anonymous depo osits Anonymous (LUX 10%, CH 50%, AUT 40%)

EUR

HUF

LUX, CH, AUT transfer to NAV, based on HUN accounts

3,400,000

1,020,000,000

LUX, CH, AUT amount of interest tax, based on transfers

4,533,333

1,360,000,000

LUX, CH, AUT estimated amount of interest on HUN accounts

12,952,381

3,885,714,268

LUX, CH, AUT estimated assets HUN (if deposit yield is 3%)

431,746,032

129,523,809,524

LUX, CH, AUT estimated assets HUN (if deposit yield is 2%)

647,619,048

194,285,714,286

LUX, CH, AUT estimated assets HUN (if deposit yield is 1%)

1,295,238,095

388,571,428,571

Peersonalized depositts EU interest rates on HUF deposits

EUR

HUF

43,666,667

13,100,000,000

Expected tax income from personalized deposits

2,096,000,000

Estimated amount of HUN assets in the EU (if deposit yield is 3%)

1,455,555,556

436,666,666,667

Estimated amount of HUN assets in the EU (if deposit yield is 2%)

2,183,333,333

655,000,000,000

Estimated amount of HUN assets in the EU (if deposit yield is 1%)

4,366,666,667

1,310,000,000,000

Source: Blochamps Capital

can be requested to provide information, but only in qualified cases, which are against Swiss regulations, too. Even then, only the requested information about a given taxpayer will be given. He stressed that it does not mean the local tax authority will collect all available data from every bank in the country about that person. MANY SHADES OF GREY Labeling all the private assets transferred abroad as illegal is a huge mistake, says Karagich. While 15 years ago truly illegal black and ‘dark grey’ transfers accounted for approximately 40−50% of the total, currently they are estimated to reach only 30%. At the same time, legal or white money transfers account for approximately 25%. ‘Light grey’ transfers, which use some kind of tax planning structure to reduce tax obligations, may be morally grey, but should not necessarily be considered illegal. Funds deposited in foreign banks by Hungarians have increased by an annual HUF 20–50 billion since 2011, up from the estimated annual HUF 250–300 bln in previous years, according to a recent Blochamps study. The main target states are Austria, Germany, Switzerland, Liechtenstein, Malta and the Benelux countries. Hungarians do not yet favor Asia, the hottest destination globally. The value of Hungarian offshore private deposits could exceed HUF 2.5 trillion. While the state receives only 75% of the taxes on interest income on Hungarian assets kept abroad, foreign banks earn significant transaction fees and

Funds deposited in foreign banks by Hungarians have grown by an annual

HUF 40−50 bln since 2011

up from the estimated annual

HUF 250−300 bln in previous years

commissions, which could, if left at home, be earned by Hungarian banks. The performance, the product range and the quality of the Hungarian private banking sector is already at a Western European level, stressed Karagich. However, due to the lack of predictability in the regulatory and business environment, the sector’s room for development is limited and there is nothing it can do about that. Karagich believes that the recently introduced Stability Savings Account (SSA) will attract domestic gray money rather than luring back funds deposited

abroad. The construction favors certain groups, for example lawyers and those in the real estate sector, who will benefit from tax exemptions, while they do not have to justify the origin of these assets. At least HUF 5 million has to be deposited and the same individual can open an unlimited number of accounts. Tax liability arises only when a part or the total sum is withdrawn from the account, although if this happens after more than five years, the income is fully tax exempt.

SALE OF FORECLOSED RESIDENTIAL REAL ESTATE CIB Group is offering numerous residential properties for sale in Budapest via an online auction. Register to bid: by 2 April 2014

d Registration an details at lanaukcio.hu www.cibingat

Bidding period: 9-11 April 2014 For more information please call the following number: (+36 1) 423 1300 Details on real estate properties offered for auction, the timing of the on-site viewings of all real estate, the registration form, details and rules of the auction described in the General Terms and Conditions are available on our website: www.cibingatlanaukcio.hu. We reserve the right to withdraw the auction at the beginning of the auction at latest. Pictures are for illustrational purposes only. Lead agent:

Member of

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Budapest Business Journal | March 14 – March 27

BBJ Research Markets in numbers

BANKS STARTING TO REGAIN THEIR FOOTING The finance industry has seen tough years lately, which was shown in the sector’s poor overall profitability and high rate of non−performing loans. While 2013’s results may not mean a trend change in and of themselves, they do indicate that the sector has a better outlook, evidenced by the fact that even with several banks – either publicly or reportedly – mulling a departure from Hungary, there have been no profound changes. GERGŐ RÁCZ

BANK’S ROLE IN GDP

PROFITABILITY

The pressure on the finance industry meant that banks contributed less to the overall growth of the economy in 2013. Besides real estate, KSH found that the finance sector was the only sector of industry to see negative growth in every quarter of the year. Overall, finance and insurance contracted 1.7% in 2013, which KSH attributed to the fact that there was no increase in lending in either retail or businesses divisions.

The Hungarian banking sector ended 2013 profitable after two consecutive years of loss−making. Banks were and still are under pressure from sectoral taxes, which the government has pledged to keep in effect, while several banks with larger exposure to foreign currency lending are having issues with the deterioration of their portfolios. While the aggregate profit is somewhat misleading, since it took a one−off capital injection at MKB Bank to take the total into the black, it is still indicative of a hinted at recovery.

CHANGES IN BANK INDUSTRY’S SHARE IN GDP (%)

BANKS’ PRE-TAX PROFITS (HUF BLN)

5 3.75 2.5 1.25 0 -1.25 -2.5 -3.75 -5

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Source: MNB, BBJ Research

Sources: KSH

MKB Bank: Erste Bank:

Éva Hegedűs, Gránit Bank

“Without lending there is no investment, without investments, there is no growth, and investments are also a prerequisite of job creation”

HUF 80 bln capital raise

HUF 24.9 bln loss OTP Bank:

HUF 1.4 bln proﬁt, down 95% YoY

WWW.BBJ.HU

Budapest Business Journal | March 14 – March 27

FOREX LOANS

STIMULUS PROGRAM

One of the biggest concerns banks may harbor is the legal course of action the government is planning to take to bail out the remaining foreign currency debtors. Experience shows such efforts usually entail losses for the fiancé sector. The matter is currently unresolved, with several different legal institutions being involved. The supreme court, the Kúria, reached a ruling that left numerous aspects unresolved, the Constitutional Court will shortly have a say and, ultimately, the European Court of Justice will conclude the process, but that final verdict may still be months away.

One of the most ambitious campaigns initiated by the central bank’s new management is the ‘Funding for Growth’ campaign, which offers banks funds at 0% interest that they are then to issue to businesses to stimulate growth. The HUF 2,750 billion budget, more than 9% of the country’s gross domestic product, is anticipated to show a profound effect in industrial output and businesses employment. By March, the second stage of the program has lost some momentum, but analysts still think it will have an overall favorable effect.

FUNDING FOR GROWTH IN NUMBERS

Source: MNB

“As with FX mortgage restructuring, time is going to be key, even if the end point is clear. The Peter Attard Montalto, government and Nomura MNB are unlikely to be ready to provide logistics until there is a broader policy framework agreement, so we do not believe the kicker is there yet.”

“The ﬁnal decision about the next stage of foreign currency debtor relief will likely come after the elections.” Ákos Kuti, Equilor

Source: MNB

“There is an unprecedented amount of credit available to companies this year. The corporate lending market will be determined solely on the capacity expansion demand dictated by domestic and foreign markets.” Péter Hodina, K&H Bank

“The Funding for Growth program successfully stopped a deterioration of the investment rate, which is a key factor in a country’s growth prospects. However, this indicator is still lower in Hungary compared to its regional peers.”

András Balatoni, ING Bank

The BBJ Research column reviews a given industry, gives a market round−up and analyzes the numbers behind the market tendencies. Our analysis is based on the latest edition of the Book of Lists. For the latest, updated figures, check out DigiBOL, the digital version of the Book of Lists. www.digibol.hu

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Budapest Business Journal | March 14 â€“ March 27

Commercial banks Ranked by number of bank branches RANK

NO. OF BANK BRANCHES IN HUNGARY ON MARCH 1, 2014

COMPANY WEBSITE

OTP BANK NYRT

K&H BANK ZRT

ERSTE BANK HUNGARY ZRT

RAIFFEISEN BANK ZRT

BUDAPEST BANK ZRT

UNICREDIT BANK HUNGARY ZRT

CIB BANK ZRT

MKB BANK ZRT

SBERBANK MAGYARORSZĂ G ZRT

DRB DĂ‰L-DUNĂ NTĂšLI REGIONĂ LIS BANK ZRT

www.otpbank.hu

www.kh.hu

www.erstebank.hu

www.raiffeisen.hu

www.budapestbank.hu

www.unicredit.hu

www.cib.hu

www.mkb.hu

www.sberbank.hu

TOTAL ASSETS IN 2012 (HUF BLN)

PRE-TAX PROFIT IN 2012 (HUF MLN)

EQUITY (HUF MLN)

PRIVATE BANKING

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

MAGNET BANK ZRT

CITIBANK EUROPE PLC HUNGARY BRANCH OFFICE

www.magnetbank.hu

SOPRON BANK BURGENLAND ZRT

KDB BANK EURĂ“PA ZRT

AXA BANK EUROPE S.A. HUNGARY BRANCH

www.sopronbank.hu

www.kdbbank.eu

6,471

77,830

1,036,484

219

2,470

41,053

182,674

â€“ KBC Bank N.V (100)

Hendrik Scheerlinck

1095 Budapest, Lechner Ă–dĂśn fasor 9. (1) 328-9000 (1) 328-9696 bank@kh.hu

135

2,761

â€“11,063

160,416

â€“ EGB Ceps Holding GmbH (100)

Jelasity RadovĂĄn

1138 Budapest, 1pSIÂ UGĹƒ XWFD Â˛ (40) 222-221 (1) 373-2499 uszolg@erstebank.hu

Heinz Wiedner

1054 Budapest, AkadĂŠmia utca 6. (40) 484-848, (1) 484-8484 (40) 484-4444 info@raiffeisen.hu

GyĂśrgy Zolnai

1138 Budapest, VĂĄci Ăşt 193. (1) 450-6000 (1) 450-6001 info@budapestbank.hu

MihĂĄly Patai

1054 Budapest, SzabadsĂĄg tĂŠr 5â€“6. (1) 301-1271 (1) 353-4959 info@unicreditgroup.hu

120

2,119

â€“60,935

110,269

â€“ Raiffeisen-RBHU Holding GmbH (100)

101

908

13,592

121,459

â€“ GE Capital International Financing Corp (100)

â€“ UniCredit Bank Austria AG (100)

Fabrizio Centrone

1027 Budapest, Medve utca 4â€“14. (1) 423-1000 (1) 489-6500 cib@cib.hu

PĂĄl SimĂĄk

1056 Budapest, VĂĄci utca 38. (1) 327-8600 (1) 327-8700 telebankar@mkb.hu

Axel Helmut Hummel

1088 Budapest, RĂĄkĂłczi Ăşt 7. (1) 328-6666 (1) 328-6660 info@sberbank.hu

100

1,687

37,098

169,804

2,157

â€“127,922

175,556

â€“ Intesa Sanpaolo Holding International S.A (67.70), Intesa Sanpaolo S.p.A (32.30)

2,308

â€“88,122

118,999

â€“ Bayerische Landesbank (98.56), Other (0.05), P.S.K. Beteiligungsverwaltung GmbH (1.39)

â€“ Sberbank Europe AG (98.93), TĂźrkise Halk Bankasi (1.07)

Zsolt Szalai

7800 SiklĂłs, FelszabadulĂĄs Ăştja 46â€“48. (72) 805-800 (72) 805-827 info@drbbank.hu

Zsolt FĂĄy

1062 Budapest, AndrĂĄssy Ăşt98. (1) 428-8888 (1) 428-8889 info@magnetbank.hu

550

â€“18,490

19,155

â€“12

2,735

â€“

Individual (Âť), other (Âť) Other (Âť)

771

4,156

â€“

Individuals and companies (70) Caja Navarra (30)

P. Sianturi Batara

1051 Budapest, SzabadsĂĄg tĂŠr 7. (1) 374-5000 (1) 374-5100 citibankmagyarorszag@citi.com

745

13,189

6,993

â€“ Citibank Europe Plc (100)

â€“326

6,329

â€“

â€“ Hypo-Bank Burgenland AG (100)

Mag. Maller-WeiĂ&#x; Andrea

9400 Sopron, Kossuth L. utca 19. (99) 513-000 (99) 513-038 sopronbank@sopronbank.hu

177

2,914

28,276

â€“

â€“ Korea Development Bank (100)

Chung Hun Jin

1054 Budapest, Bajcsy-Zsilinszky Ăşt 42â€“46. (40) 374-9900 (1) 374-5454 info@kdbbank.eu

Jerome Emmanuel Joseph Picon

1138 Budapest, VĂĄci Ăşt135â€“139. (1) 465-65600 (1) 465-6599 info.axa@axa.hu

Erika Gstettenhofer

1062 Budapest, VĂĄci Ăşt 1â€“3. (1) 298-2900 (1) 298-2975 bp@oberbank.hu

IstvĂĄn SalgĂł

1068 Budapest, DĂłzsa GyĂśrgy Ăşt 84/B (1) 235-8700 (1) 269-6447 ing@ing.hu

Laurent Poiron

1051 Budapest, SzĂŠchenyi IstvĂĄn tĂŠr 7â€“8. (1) 374-6300 (1) 269-3967 info.hu@bnpparibas.com

405

â€“16,309

11,145

â€“

â€“ AXA Bank Europe S.A (100)

â€“159

â€“2,855

â€“

â€“ Oberbank AG (100)

â€“

â€“ ING Bank N.V (100)

â€“ BNP Paribas S.A (100)

www.axa.hu

OBERBANK AG HUNGARIAN BRANCH OFFICE www.oberbank.hu

ING BANK N.V. HUNGARY BRANCH

BNP PARIBAS HUNGARY BRANCH OFFICE

www.ing.hu

www.bnpparibas.hu

SĂĄndor CsĂĄnyi

1051 Budapest, NĂĄdor utca 16. (1) 473-5000 (1) 473-5955 informacio@otpbank.hu

397

www.citibank.hu

ADDRESS PHONE FAX EMAIL

Individuals and companies (29.10), Hungarian State (4.90), Own shares (1.50), Employees (1.80) Individuals and companies (52.30), Others (18.60)

www.drbbank.hu

TOP LOCAL EXECUTIVE

356

210

10,157

â€“6,754

43,645

12,043

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Budapest Business Journal | March 14 â€“ March 27

Fund management companies RANK

Ranked by number of funds managed COMPANY WEBSITE

K&H FUND MANAGEMENT ZRT

OTP FUND MANAGEMENT ZRT

BUDAPEST FUND MANAGEMENT COMPANY ZRT

www.khalapok.hu

www.otpalap.hu

NO. OF FUNDS MANAGED ON MARCH 1, 2014

TOTAL NET REVENUE IN 2012 (HUF MLN)

PRE-TAX PROFIT IN 2012 (HUF MLN)

MANAGED ASSETS IN 2012 (HUF MLN)

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE

ADDRESS PHONE FAX EMAIL

104

3,456

1,769

639,673

K&H Bank Zrt (100) â€“

Zsuzsa Zobor

1095 Budapest, Lechner Ă–dĂśn fasor 9. (1) 483-5000 (1) 483-5002 alapkezelo@kh.hu

10,929

137

771,425

,1*$ .(77Ĺ‚ ,QJDWODQNH]HOĹƒ ĂŠs HasznosĂtĂł Kft (95), OTP Bank Nyrt (5) â€“

IstvĂĄn Hamecz, Benedek KĂśves

1134 Budapest, VĂĄci Ăşt 33. (1) 412-8300 (1) 412-8399 levelek@otpalap.hu

1,890

1,298

222,434

Budapest Bank Zrt (100) â€“

Gyula FatĂŠr, LĂĄszlĂł PĂĄzmĂĄndi

1138 Budapest, VĂĄci Ăşt 193. (1) 450-7262 (1) 450-7264 â€“

851

172

119,651

MKB Bank Zrt (100) â€“

Ă kos Bartha, Nikoletta Csorba

1056 Budapest, VĂĄci utca 38. (1) 268-7081 (1) 268-7509 mkbalapkezelo@mkb.hu

1,347

509

88,173

Qunatis Holding Zrt (100) â€“

Ă kos SĂĄrĂĄndi

1036 Budapest, Ă rpĂĄd fejedelem Ăştja 79. (1) 413-2260 (1) 413-2268 ugyfelszolgalat@quartis-group.com

Botond BilibĂłk

1123 Budapest, AlkotĂĄs utca 50. (1) 489-2280 (1) 489-2290 kapcsolat@concordealapkezelo.hu

www.bpalap.hu

0.% %()(.7(7e6, $/$3.(=(/Ĺ‚ =57

QUANTIS INVESTMENT MANAGEMENT ZRT

www.mkbalapkezelo.hu

www.quantis-group.com

CONCORDE ASSET MANAGEMENT

(567( $/$3.(=(/Ĺ‚ =57

CIB INVESTMENT FUND MANAGEMENT ZRT

www.concordealapkezelo.hu

www.erstealapkezelo.hu

1,509

711

173,641

Concorde BefektetĂŠsi ĂŠs (V]N|]NH]HOĹƒ =UW &$ ,QYHVWRUV 9DJ\RQNH]HOĹƒ =UW (25), Arpand Zrt (12), Setinvest Zrt (4), Individuals (9) â€“

1,199

184

469,084

â€“ Erste Asset Management GmbH (100)

Tibor GyĂśrgy MesterhĂĄzy

%XGDSHVW 1pSIÂ UGĹƒ XWFD Â˛ (1) 235-5893 (1) 235-5889 erstealapkezelo@erstealapkezelo.hu

2,340

658

177,279

â€“ VĂšB Asset Management, sprĂĄv. spol., a.s (100)

Tibor Komm

1027 Budapest, Medve utca 4â€“14. (1) 423-2400 (1) 489-6675 alapkezelo@cib.hu

2,170

577

156,952

Raiffeisen Bank Zrt (80), Raiffeisen GazdasĂĄgi SzolgĂĄltatĂł Zrt (20) â€“

AndrĂĄs Balogh

1054 Budapest, AkadĂŠmia utca 6. (1) 477-8478 (1) 477-8499 info@rif.hu

1,245

434

62,501

Generali-Providencia Insurance Zrt (74) Generali PPF Holding B.V (26)

PĂŠter Schuszter

1066 Budapest, TerĂŠz kĂśrĂşt 42â€“44. (1) 301-7345 (1) 301-7255 alapkezelo@generali.hu

761

124

31,790

â€“ Aberdeen Asset Management Plc (100)

Krisztina Kozma, Ă gnes Lugosi

1062 Budapest, VĂĄci Ăşt 1â€“3. (1) 413-2950 (1) 413-2980 information.hungary@aberdeen-asset.com

745

137

42,249

OTP Bank Nyrt (100) â€“

BalĂĄzs TĂłth

1012 Budapest, PĂĄlya utca 4â€“6. (1) 336-0900 (1) 201-9322 alapkezelo@otpingatlanalap.hu

313

138

8,329

)HUHQF 6]|OOĹƒVL ,QGLviduals (43), ZsĂźzsĂź Kft (5), Stalmayer Kft (2) â€“

)HUHQF 6]|OOĹƒVL

1037 Budapest, Montevideo utca 3/B (1) 436-9623 (1) 436-9623 dialog@dialoginvestment.hu

3,450

Quaestor PĂŠnzĂźgyi TanĂĄcsadĂł Zrt (100) â€“

PĂŠter KĂĄrpĂĄti

1132 Budapest, VĂĄci Ăşt 30. (1) 299-9999 (1) 288-0945 zsombor.szabo@quaestor.hu

264

15,919

FHB JelzĂĄlogbank Nyrt (99.80), Management (0.20) â€“

MĂĄrton OlĂĄh

1027 Budapest, Kacsa utca 15â€“23. (1) 888-4120 (1) 888-4171 alapkezelo@diofaalapkezelo.hu

234

35,803

TakarĂŠkBank Zrt (100) â€“

TamĂĄs DĂŠzsi

1122 Budapest, PethĂŠnyi kĂśz 10. (1) 555-0555 (1) 555-0550 bo@takarekalap.hu

1,176

938

9,473

Allianz HungĂĄria Insurance Zrt (100) â€“

Attila Fekete

1087 Budapest, KĂśnyves KĂĄlmĂĄn kĂśrĂşt 48â€“52. (1) 301-6161 (1) 301-6384 alapkezelo@allianz.hu

315

14,813

â€“ UniCredit Turn-Around Management CEE GmbH (100)

LĂĄszlĂł ForgĂĄcs, RĂłbert TakĂĄcs, IstvĂĄn Kiss

1023 Budapest, BĂŠcsi Ăşt 3â€“5. (1) 225-2500 (1) 225-2501 info@europaalap.hu

232

34,445

)LQH[W 9DJ\RQNH]HOĹƒ 1\UW Individuals (10) â€“

PĂĄl Darida, Tibor TatĂĄr

1082 Budapest, FutĂł utca 43â€“45. (1) 266-2181 (1) 266-2154 zimonyi.maria@futureal.hu

www.cibalap.hu

RAIFFEISEN INVESTMENT FUND MANAGEMENT ZRT alapok.raiffeisen.hu

*(1(5$/, $/$3.(=(/Ĺ‚ =57

ABERDEEN ASSET MANAGEMENT HUNGARY ALAPKEZELĂ• ZRT

www.generalialapkezelo.hu

www.aberdeen-asset.hu

OTP PROPERTY MANAGEMENT FUN ZRT www.otpingatlanalap.hu

DIALOG INVESTMENT FUND MANAGEMENT ZRT www.dialoginvestment.hu

QUAESTOR INVESTMENT FUND MANAGEMENT ZRT www.quaestor.hu

',Ă?)$ $/$3.(=(/Ĺ‚ =57

TAKARĂ‰K FUND MANAGEMENT ZRT

$//,$1= $/$3.(=(/Ĺ‚ =57

EUROPA FUND MANAGEMENT ZRT

FINEXT BEFEKTETĂ‰SI $/$3.(=(/Ĺ‚ =57

www.diofaalapkezelo.hu

www.takarekalapkezelo.hu

www.allianz.hu

www.europaalap.hu

â€“

7KLV LV QRW D IXOO OLVW ,W LV HGLWHG DQG Ă€OWHUHG E\ WKH UHVHDUFK VWDII RI WKH %XGDSHVW %XVLQHVV -RXUQDO )RU D PRUH FRPSUHKHQVLYH LQGXVWU\ OLVW FKHFN WKH ODWHVW LVVXH RI WKH %RRN RI /LVWV

Âť = would not disclose, NR = not ranked, NA = not applicable

This list was compiled from publicly available data from BAMOSZ and MNB. To the best of the Budapest Business Journalâ€™s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, MadĂĄch Imre Ăşt 13â€“14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

BBJ

4 Socialite WINE REVIEW

Bikavér itself emerged as the winner of last month’s so−called Bikavér parbaj (duel) between Eger and Szekszárd with quality− minded winemakers from the two regions starting to hit the bulls−eye with regular frequency. ROBERT SMYTH

It must be said that Bikavér, or Bull’s Blood to give this red blend its increasingly less often used English moniker, still has something of a reputation for mediocrity that stems back to the former regime. Furthermore, yield limits for the standard Egri Bikavér remain ridiculously high at 100 hectoliters per hectare, meaning that a dilute load of old bull can still be made. However, many Eger winemakers are thankfully favoring imposing their own restrictions. The large producer Ostoros−Novaj has encouragingly come out with a very decent 2011 that’s clean, correct and sets a good basic standard at the supermarket entry level, with its medium intensity, tannins, body and lively acidity, plus raspberry jelly and sour cherry notes – nothing more maybe, but most importantly nothing less. The basic Egri Bikavér (a.k.a. ‘Classicus’) should be made from at least three varieties, which must all contribute at least 5% and Kékfrankos has to be one of them. None of the varieties can exceed 50% and no variety can surpass Kékfrankos, which itself must account for at least 35%. János Bolyki’s Bikavér 2011, which was spontaneously fermented in the tank and left unfiltered for extra kick, is a personal favorite with its eucalyptus, fruits of the forest and morello cherry notes, tingling acidity and

spicy−savory nuances. This is great value for around HUF 2,500. A tad pricier but also great bang for the buck is St. Andrea’s Áldás 2011, which is medium−bodied but flavor−packed and elegant. This is instead left unfined and is one of the few Egri Bikavérs to feature a touch of Kadarka. Lajos Gál’s Pajados 2009, which comes from a single vineyard with low− yielding bush vines and volcanic tufa soil, is really earthy with crispy red fruit, but carries the price of the next category up. Eger’s Bikavér ‘Superior’ category brings the yield limit down to a not particularly low 60 hl/ha and has to be composed of at least five varieties, none of which can drop below 5%. With the exception of Kékfrankos, which must contribute between 30% and 50%, the upper ceiling on the other varietals is 30%. Frenchies Cabernet Franc and Cabernet Sauvignon can’t contribute more than 30%, either individually or combined. The Christmas cake−scented Turan can’t exceed 5%. Bolyki ramps up the intensity and concentration for his Bikavér Superior 2011, which has similar flavors to the entry version but a more chocolate richness and pomegranate juiciness, while keeping that all important acid backbone that gives Bikavér its structure and personality. St. Andrea’s Burgundian−style Hangács Bikavér, which has some Pinot Noir in the mix and comes from a single vineyard, is perhaps my favorite Hungarian red over the vintages. It has more of a sense of place and uniqueness than the winery’s other and pricier Bikavér Superior, Merengő, which contains 60% of Bordeaux varietals Cabernet Franc and Merlot in 2011. It is nevertheless a very fine wine. Meanwhile, Nimród Kovács’ Bikavér Superior 2009 exuded a beguiling and heady mix of red fruit compote, herbs and tobacco. Down in the warmer climes of Szekszárd, Bikavér must be made of 50% Kékfrankos

Photo: Tímea Csankó

TAKING THE BULL BY THE HORNS

and/or Kadarka, and in practice both are usually present with the former providing the backbone and the latter bringing an extra layer of spice. The use of the playful and piquant Kadarka helps to distinguish Szekszárd Bikavér from its Eger cousin, although it was once the key grape there and is indeed making a comeback and creeping into the blends. Kékfrankos makes up 46% of Zoltán Heimann’s Szekszárdi Bikavér 2011, which in addition to 40% Merlot and 6% Kadarka also boasts 8% of the Umbrian grape Sagrantino, along with its amazingly unctuous bramble fruit character. This wine is a spicy mélange of sour cherry, blackcurrant, pomegranate, and blood orange, with juicy fruitiness and tingling acidity to keep things lively. Also from the southern region, Ferenc Veszergombi showed more of a promising return to form with his 2009. Ferenc Takler’s

robust 2009 was the most full−bodied of the bunch, and is still a baby, albeit one with a very bright future. Another top example was Csaba Sebestyén’s really spicy and herbal Iván völgy 2011. Tüske’s 2011 would, however, be my go−to wine with its low tannins, cranberry, strawberry, raspberry and dark chocolate finish. It’s also a snip at around HUF 1,500. Incidentally, Kadarka isn’t exclusive to Hungary and was actually brought here by Serbs escaping Ottoman invaders. It is known as Gamza in Bulgaria, where there is a whopping 3,000 hectares compared to Hungary’s 300, according to Caroline Gilby MW, speaking at her Blue Danube Masterclass at the fifth VinCE wine expo held in Budapest February 28−March 2. The Borovyitza Gamza 2011 oozes cherry with a pinch of black pepper.ww

Organ Concerts in Saint Stephen’s Basilica of Budapest The sound of the world-famous historic organ of the Basilica will only be heard at these concerts! The Cathedral Organ Concerts and the Organ Concerts will be organized in Saint Stephen’s Basilica of Budapest on Mondays . The events of the Cathedral Organ Concerts will begin at 17 p.m. on Mondays, with the exception of October when the concerts start at 19 p.m. In addition to the organists of the Basilica the concerts feature singers or instrumental musicians who will present the organ works and most famous church arias of Albinoni, Caccini, Bach, Mozart, Schubert, Gounod, Bizet, Rachmaninoff, Cesar Franck and Ferenc Liszt. · www.organconcert.hu

Dates of the Monday Cathedral Organ Concerts in 2014: March 17. 24. 31.

WWW.BBJ.HU

4 Socialite

Budapest Business Journal | March 14 – March 27

OUT OF THE OFFICE The BBJ gets personal WHAT IS YOUR GREATEST REGRET? It’s hard to tell. When you’re more than a half a century old, there are certainly things in your life you later consider as a mistake. Ruined moments, missed chances – however, thanks to my optimism, these memories have always faded quickly. WHAT IS YOUR GREATEST FEAR? I’m not particularly afraid of anything. Of course, it does not mean that I never get scared.

CV Gábor Adamis is the managing director of Webasto Thermo & Comfort Hungária Kft. He graduated from the technical engineering faculty of the Technical University of Budapest in 1975. He started his professional career with bus factory Ikarus and worked there until 1991. In the last three years of that period, he was deputy head of the factory’s subsidiary in Berlin. Upon returning to Hungary, Germany’s Webasto assigned him with setting up the Hungarian division of the company and he has been head of Webasto Hungária since 1992. He participated, together with former Ikarus employees and Rába Jármű Kft, in developing the S91 midibus, a model produced for the Norwegian and Swedish markets since. Adamis is married with seven children and five grandchildren.

WHAT WAS THE MOST EXTRAVAGANT THING YOU’VE DONE? Flying a helicopter, and literally going over hedge and ditch with a GAZ−69 [a four−wheel drive military vehicle used in the Soviet Army in the mid−1950s]. WHAT ARE THE ACTIVITIES THAT HELP YOU TO COPE WITH STRESS? Spending time with my grandchildren, rowing, sailing, skiing, listening to music, gardening. WHAT IS YOUR MOTTO? I don’t really have one. If I must choose one, it would be ‘hope dies last’. That is why it is worth fighting and not giving up.

At the steering wheel MY FIRST CAR... It was a Skoda S100. At the end of the 1970s, a university student was very happy with any sort of car. And if you’re in love, you tend to overlook the mistakes. The main reason I loved that car was that it was the first. Then later I loved a Ford Mondeo for being my first car from the West, and that meant a whole different category. I also loved a V70, because it has been my fastest car so far. And I love the XC90, because it is large and accommodates many grandkids. And although it’s not exactly an off road vehicle, you can drive it on roads other cars would fail on. I never had a car I didn’t love. TOP 3 THINGS TO CONSIDER ABOUT A CAR... Mobility; that they can be driven; the well-organized and impressive world of car factories. MOST ADMIRED FEATURES OF THE TEST CAR... The dynamism that comes from its performance; its multiple security system that supports driving; and its aesthetic and high-quality interior. This car gives you a real driving experience. It looks like a really good car, but not in an ostentatious way. GENERAL IMPRESSIONS OF THE TEST CAR... I really liked it, I’d be happy to have one for everyday use. I’d choose a different color though.

WHAT WOULD YOU DO WITH €1 MILLION? I’d breathe new life into the ruined Hungarian bus production.

WHAT THREE THINGS WOULD YOU TAKE WITH YOU TO A DESERTED ISLAND? A Volvo XC60, because it drives everywhere. Joking aside, a good axe, a strong magnifying glass and a seawater desalting kit that operates with renewable energy.

WHAT IS YOUR FAVORITE GADGET? I’m not into gadgets, but I use a laptop, a tablet and a mobile.

WHICH LIVING OR FICTIONAL PEOPLE DO YOU MOST DESPISE? I don’t really have any.

WHAT IS YOUR MOST MARKED CHARACTERISTIC? Optimism.

DESCRIBE YOUR DREAM DINNER PARTY? (OCCASION, VENUE, GUESTS, MENU, MUSIC, WHATEVER IS IMPORTANT TO YOU.) It could be a clear summer evening with starlight and friends, baking bacon on an open fire, with a cricket choir in the background. Or it could be in a fancy restaurant, also with friends and family, nice food and drinks and lovely music. What’s on the menu is less significant.

WHICH LIVING OR FICTIONAL PEOPLE DO YOU MOST ADMIRE? Here there are more examples. For example, one of our aunts who raised six kids on her own, struggling with difficulties but making sure that they all had a degree. In spite of this, she maintained her happy, joyous and well− balanced personality under all circumstances.

WHAT KIND OF JOB DID YOU DREAM OF WHEN YOU WERE A CHILD? I wanted to be a pilot, then a truck driver, but deep inside, I’ve always had this thing for cars and vehicles. That is why I started to work for Ikarus later on.

WHAT IS IT YOUR DREAM TO LIVE TO SEE? To see my grandchildren growing up and becoming valuable persons. And to see domestic orders for the S91 midibus (apart from orders from abroad) and for serial production to kick off.

WHAT DO YOU CONSIDER YOUR GREATEST ACHIEVEMENT? Creating the S91 midibus within a half year by recruiting a team for that.