HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU
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BUSINESS JOURNAL BUDAPEST
VOL. 27. NUMBER 5
MARCH 18 – MARCH 28, 2019
SPECIAL REPORT Banking
BUSINESS
Ad Market Continues to Grow, Albeit at Slower Pace Advertising spend in Hungary reached HUF 259.69 billion last year, with online remaining the most dominant segment and outdoor registering the largest increase, the Hungarian Advertising Association (MRSz) has said. 7 NEWS
Central Bank Readies for Normalization With the February core inflation accelerating to a six-year-high of 3.5%, and headline inflation being one percentage point above the mid-term goal of 3%, the National Bank of Hungary is closer than ever to the start of a normalization process. 3 SOCIALITE
Blues Godfather John Mayall Rolls Into Budapest On March 19, legendary British bluesman John Mayall makes a return visit to Budapest’s Akvárium Klub, an absolute treat for blues lovers or, indeed, anyone who loves hearing world-class musicians play live. 22
Citi Wants its Slice of Digital Cake
S PEC
RE IAL
POR
T
In a first, exclusive interview with the BBJ, Citi’s Kevin A. Murray reflects on a strong year for the bank in Hungary, being shortlisted for the Expat CEO of the Year title, and combating the labor crisis. 15
Bigger & Better Top Ranked: M&A & Banking & Finance & Capital Markets & Intellectual property & Projects Energy & Dispute resolution & TMT & Real estate & Data protection
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THE EDITOR SAYS
EDITOR-IN-CHIEF: Robin Marshall EDITORIAL STAFF: Zsófia Czifra, Kester Eddy, Bence
Gaál, David Holzer, Levente Hörömpöli-Tóth, Christian Keszthelyi, Gary J. Morrell, Robert Smyth, Zsófia Végh, Zalán Zubor. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:
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Forgive me an indulgence if you are one of our many Hungarian readers, but as a second-language publication, it should come as no surprise that we champion the contribution made to Hungary’s economy by expatriate business people of all nationalities, or that we organize the annual BBJ Expat CEO of the Year awards, and produce the Top Expat CEOs publication. After all, for all that we have been owned by a Hungarian publishing house for about a decade, we were established 27 years ago by a group of largely, though not exclusively, American expats. I have now worked considerably longer abroad than I did in my native United Kingdom, which would seem to indicate that I like the expat life. And that is perfectly true, though I rarely think of myself as an expat at all, if truth be told. This is where I live, and where my Hungarian wife and my Anglo-Hungarian children live, so this is home. For the special report on banking that accompanies this issue, I finally had the opportunity to sit down for a faceto-face interview with Kevin A. Murray, the head of Citi’s operations in Hungary. He has been here three years, but in that time he has also taken on responsibility for the oversight of Citi’s other businesses in Central Europe (specifically Romania, Bulgaria, Czech Republic and Slovakia). That makes scheduling appointments somewhat tricky, so although we have seen each other at various business chamber events and at the Expat CEO gala, of course, we had not found time to get down to a detailed
discussion. You will find the results of that conversation inside (see “Inclusivity, Openness and a Meritocracy”, Page 15) but I wanted to touch here on one subject that did not make it into the final interview because of space pressures. Murray, you see, knows something about the life expatriate, having worked and lived in India, Japan, Senegal and the United Kingdom, as well as the United States and Hungary. (He also had time to fit in a career with the United States Air Force that saw him reach the rank of Lieutenant Colonel, but that’s another story.) So how, you might wonder, does Hungary compare? It is a question he says he gets asked a lot. “Every place is different, every place has its own sweet spot, and every place has given my wife and I wonderful memories,” he tells me. “But if you ask me where my favorite spot is, I will tell you it is where my home is, and right now my home is Hungary. You have to make your home where you are at, otherwise you look at things as just being temporary, and you miss out on so much. You need family support and you need to be comfortable, and if you have that, the expat live is wonderful.” That’s a pretty good summation of what the experience has to offer: travel, memories, friendships and experiences. And if you are lucky, they even pay you, as well. Robin Marshall Editor-in-chief
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In the colour photo, a Hungarian firefighter tackles a field fire near Sajókeresztúr (189 km northeast of Budapest, near Miskolc) on March 6. The black and white picture from the public Fortepan archive is a portrait of a fireman dated 1904, showing how much even the basic uniform has changed in the past century and a bit.
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News///macroscope
Almost There: Central Bank Readies for Normalization
With the February core inflation accelerating to a sixyear-high of 3.5%, and headline inflation being one percentage point above the mid-term goal of 3%, the National Bank of Hungary (MNB) is closer than ever to the start of a normalization process.
Inflation in Hungary, from 1991-2019 (January-February) Change compared to the pervious year,%
be at
3.5%,
putting the average annual inflation rate at around 3%. He noted that the central bank is facing a difficult situation: while the inflationary pressure prompts tightening actions, the global environment is not favorable, which calls instead for maintaining the current dovish policy. Németh believes that the MNB, in spite of the accelerating inflation rate, will not start tightening monetary conditions in the next three months; action can only be expected nearer the end of the second quarter, he says.
Source:
ZSÓFIA CZIFRA
To the surprise of many analysts, headline inflation accelerated to an annual 3.1% in February, up from 2.7% in January, data released by the Central Statistical Office (KSH) shows. Prices rose by 0.6% from the previous month in February. Core inflation and tax-adjusted core inflation (a new anchor for the central bank) were also on the rise, which is mainly attributed to higher food and fuel prices. “The increase was driven primarily by the food category, as well as tobacco and alcohol, where prices increased due to an excise tax hike. Fuel prices decreased on an annual basis, but they also rose in February compared to the previous month,” KSH commented on the data. In February 2019, compared to February 2018, food prices increased
by
5.2%.
The price of alcoholic beverages and tobacco rose by 7% on average, within which tobacco prices rose by 9.6%. Prices of clothing increased 2.1% and consumer durables prices edged up 0.7%. Household energy prices rose 1.2%, while service prices were up 2.7%. Prices in the category of goods that includes vehicle fuel inched up 0.6%. In January-February 2019, prices rose by 2.9% compared to the first two months of last year.
Above Expectations
According to ING Bank analyst Péter Virovácz, the rise in consumer prices in February was way above expectations. He said that the acceleration was mainly due to higher food prices; in particular, higher tax rates on unhealthy food products lifted overall food prices. Fuel prices lifted overall inflation only by 0.1 of a percentage
month BUBOR rate will move closer to the base rate by the end of the year. K&H Bank head analyst Dávid Németh predicts an annual inflation rate of 3.3% in March, then expects a slowdown until the end of the summer, to as low as 2.5%. By yearend, Németh thinks the rate will
point. He noted that prices for services remained flat compared to January. Core inflation, on the other hand, jumped to a six-year high, he emphasized. All main data lines are above the 3% medium-term target of the central bank, therefore if the MNB wants to act according to its pledge to keep watching the inflation rate, it should start a tightening cycle, Virovácz said. He believes that the bank will start the normalization process in March by reducing the forint liquidity it earlier released to the market via its FX-swap facility and increasing short-term BUBOR (the Budapest Interbank Offered Rate, the average interest rate at which the commercial banks lend to one other). The latest data indicates increasing price pressure, which is clearly shown by the fact that both core inflation and the tax-adjusted core inflation rate were above 3%, Takarékbank analyst Gergely Suppan noted. He, too, thinks that the central bank will start by reducing its FX-swap facility. This alone could lead to a stronger forint, as conditions in the global economy have been eased. Imported inflation can still be lower, which, together with a moderate strengthening of the forint, could slow down inflation in the second half of the year, the analyst concluded. Analysts at Takarékbank expect the annual inflation rate to average 3% this year, up from an annual average of 2.8%
in
2018.
The rate could remain lower if oil, energy and fuel prices stay near their current level in the longer run, while increasing domestic demand and a rise in salary costs could
accelerate inflation. According to Suppan’s expectations, the base rate will remain unchanged until the middle of next year.
Slowdown Expected
According to Erste Bank analyst Orsolya Nyeste, annual inflation might further accelerate in March, mainly due to changing vehicle fuel prices, but after this, a slowdown is expected. However, both the core inflation and the tax-adjusted core inflation might remain above the 3% target of the central bank in the upcoming months. She expects that the normalization of monetary policy will start soon, with the Monetary Council first raising the one-day deposit rate. According to her, the threeADVERTISEMENT
Numbers to Watch in the Coming Weeks On March 26, the Monetary Council of the National Bank of Hungary will hold its regular ratesetting meeting, with all eyes surely on the decision makers. As for the Central Statistical Office, its calendar is not particularly crowded for the next two weeks: January data from the construction sector was due to be published on March 14, just after this issue went to print, while the state of the labor market will be revealed on March 28, and the month will close with the release of the industrial producer prices for February.
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Trenkwalder Hungary Picks General Manager HR services provider Trenkwalder Hungary has announced the appointment of Balázs G. Nagy as general manager. With more than one-and-a-half decades of management and business development experience, Nagy has served as the president of the Hungarian Service and Outsourcing Association (HOA) since July 2017. In his new position, he named as priority tasks the further enhancement of Trenkwalder’s complex service providing profile and the wide use of digital HR solutions. The 39-year old expert previously headed Manpower Business Solutions Kft. for nearly eight years, during which he built up the group’s branch business processes outsourcing unit from scratch. He operated service and administration centers, managed the outsourcing of recruitment processes, and participated in relocating full operations from Western Europe to Hungary, and from here to Asia.
Balázs G. Nagy Prior to that, Nagy worked as a software development manager at Exact Software between 2003 and 2008, dealing with workflow management and the development of various information processes. “It is a great success that Balázs G. Nagy, a specialist with outstanding professional experience, will be at the helm of our Hungarian subsidiary,” said Tamás Fehér, vice president of the Trenkwalder Group in Austria. “His person is a guarantee that Trenkwalder can further strengthen its leading role in Hungary by further exploiting market opportunities under his leadership.” Nagy said: “I would like to continue the work that has begun in recent years in which Trenkwalder has taken significant steps towards complex personnel services. My goal is to provide our customers with the widest possible range of cost-effective and efficient HR services. To achieve this, I will place great emphasis on digitization, the widest possible use of automation opportunities, and the introduction and development of forward-looking digital HR solutions.”
professional experience in a wide range of complex logistics services. He started his tenure at the company with the organization of beverage logistics, and then took over the management of the
Milán Krunity company’s whole FTL branch. Subsequently, he became a client manager and senior client manager, where his career already intertwined with Dreher, as he was responsible for customer relations and delivering products of the brewing company. Afterwards, as a leader of Waberer’s haulage branch, Krunity was in charge of four divisions, and subsequently a completely new area, the company’s service development, also came under his control. “I’m looking forward to the new challenge of managing Dreher’s logistical tasks with great pleasure and the same amount of excitement,” said Krunity. “The FMCG area has always been close to me, and one of my long-standing desires is coming true by being able to utilize my theoretical experience gained at university and my practical experience from the complex logistics service sector at a 165-year-old company that has a special legacy.” The responsibilities of Krunity will cover the entire logistics of Dreher Breweries, the press release noted.
Gerald Grace Appointed Invitech CEO Business IT solutions provider Invitech has announced the appointment of Gerald Grace as chief executive officer. Gerald succeeds David Blunck, who will leave the company by mutual agreement, the company said via a press release. Grace had been chief financial officer of Invitech since October 2017. He has more than 20 years of experience in the international B2B telecommunications sector.
Dreher Appoints Head of Logistics Milán Krunity took over as head of logistics at Dreher Breweries Zrt. at the end of last year, joining the company from road haulage and warehouse logistics provider Waberer’s, Dreher told the Budapest Business Journal in a press release. After graduating from Budapest University of Technology and Economics, Krunity immediately joined Waberer’s, where he gained more than 15 years of
Gerald Grace Earlier in his career, he was CFO of GTS Central Europe, and more recently worked in several positions at Six Degrees, a U.K.based hosting and managed service provider. “I am honored to lead the Invitech team and to build on the strong legacy that
David has created,” said Grace. “Under his leadership, Invitech has become a leading player in the Hungarian ICT market focused on the B2B segment. Using Invitech’s extensive fiber and radio networks, coupled with its Tier III data center infrastructure, Invitech is ideally positioned to continue to serve the growing needs of our 6,000 Hungarian business customers with high-quality managed service products including Connectivity, Cloud and IT Services.” Tamás Szalai, investment director at Invitech’s owners, CEE Equity Partners, said: “We are pleased to have Gerald on board to lead the business into the next phase of investment, growth, and development. I would also like to express my appreciation to David for his leadership of Invitech over the last several years and particularly for his successful management of the divestment of the Invitel residential business to Digi Group.”
Microsoft Hungary Names Mattheisen General Manager Microsoft Hungary has announced the appointment of former Magyar Telekom CEO Christopher Mattheisen as general manager, effective March 4. Mattheisen has more than two decades of working in senior leadership roles in telecommunications and IT. He started his career launching Westel 900 (the
describes as the region’s most successful shopping and entertainment center. Ion joined the company group in 2012 as head of commercialization, before moving on to being responsible for the company group’s retail leasing functions as CLO. She had her greatest successes to date in Arad, Romania, heading the Atrium Mall, transforming the establishment from a struggling shopping center into a market leader. In five years, she doubled the number of visitors and average leasing fees, while tripling the building’s value.
Simona Ioana Ion In her latest position, Ion is responsible for retaining the market-leading position of WestEnd, currently celebrating its 20th anniversary. She is also tasked with measuring the newest customer habits and needs, and carrying out related activities. Ion is now responsible for the operations of WestEnd’s three office buildings, as well as the WestEnd Hilton hotel.
Gránit Pólus Appoints Business Development Director
Christopher Mattheisen predecessor of T-Mobile in Hungary), and moved on to marketing, sales and strategy roles at other operators in Europe, including Era GSM in Poland, MediaOne International, BT Cellnet (O2), as well as two IT startups in the U.K. and U.S. Mattheisen returned to Hungary to run the fixed-line business of Magyar Telekom in 2002, before his promotion to CEO in 2006. He led Telekom successfully for 12 years until 2018. “This is a truly exciting time to join the Microsoft team. Emerging technologies such as Cloud, Big Data, Internet of Things, Artificial Intelligence, and even Augmented/Virtual Reality are now becoming mainstream, and Microsoft can claim a leading position in each of them,” Mattheisen said. “In my new role, I look forward to helping Hungarian businesses and organizations take full advantage of the opportunities created by these technologies,” he added.
WestEnd Property Management General Manager Named Gránit Pólus Group has announced the appointment of Simona Ioana Ion as general manager of WestEnd Property Management Ltd. Since January, the expert has been responsible for operating what Gránit Pólus
Gránit Pólus Group has named Attila Prosits as its business development director; he previously headed the capital’s WestEnd City Center mall successfully for nearly ten years. With the creation of the new position, the group aims at opening up possibilities for third parties to cooperate with Gránit Pólus in building financial successes for their own commercial properties, utilizing the group’s 25 years of experience and knowledge in property operation. Prosits has two decades of experience in the real estate development and operations
Attila Prosits industry. His commercial work was recognized with a Gábor Klauzál Prize. He is a board member of the Hungarian Association of Shopping Centers (MBSZ) since 2010, also joining the Economic Council of the Hungarian Olympic Committee as a regular member in 2014. The newly appointed director earned his International Master’s in Management degree from Purdue University (U.S.) and the TIAS School for Business and Society (Netherlands).
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CEE Investment Volumes Continue to Rise CEE investment volumes have continued to rise, albeit at a slower rate. Local capital is dominating the Hungarian and Czech investment markets. While Poland is the dominant CEE market, Budapest is the only market where yield compression is forecast in all market sectors, according to the third “Europe & CEE Budapest Investment Briefing”, organized by London-based Real Estate Insights and sponsored by TriGranit and Colliers International. GARY J. MORRELL
CEE investment volumes reached new heights in 2018 as overall volumes increased by 7% according to Colliers International. However the rate of growth is slowing.
Outllook 2019 RE Investment Briefings. “The availability of cheap funding was undoubtedly a major factor in the strong performance of real estate markets in Europe and CEE in recent years,” commented Mark Robinson, CEE research specialist at Colliers International. “It has triggered volumes in the CEE-6 [Bulgaria, Czech Republic, Hungary, Poland, Romania, and Slovakia] to new highs in 2018, with EUR 13.8 billion of flow, up 5% year-on-year. CEE-6 real estate’s increased liquidity has propelled it to new heights,” he told the event, attend by around 80 real estate professionals. Hungary recorded a little more than EUR 1.8 bln for 2018, compared to EUR 2.6 billion for Czech Republic and EUR 7.2 bln for Poland, with
41% of total
volume, the dominant CEE market. The office sector in the CEE-6 is seen as having staged a rebound last year with 59% of the total volume. At the same time, volumes
in the retail sector have fallen and the industrial sector firmed. “The development outlook for Hungary is very sound with reference to occupational rates, the ability to source finance and investment demand,” commented Noah Steinberg, chairman and CEO of Wing. “Headline rental growth still looks likely in 2019 in office in the Visegrad-4 capitals [Bratislava, Budapest, Prague, and Warsaw] and across the spectrum in Hungary, even with gathering economic headwinds. 2020 may be tougher,” added Robinson.
Notable Feature
A notable feature of the Hungarian investment market is the role of local capital, which rose to 55% of the total volume in 2018. Czech and Slovak funds have also achieved significant roles in their
Hungary Showcased at MIPIM In response to the need to better promote the country the Municipality of Budapest, the Hungarian Investment Promotion Agency and the Association of Property Developers’ Round Table (IFK) have established “Budapest-Hungary, Time To Invest”, a joint stand at the 30th MIPIM, to be held this week at the Palais des Festivals in Cannes. GARY J. MORRELL
The investment value of the Hungarian projects presented at what is the leading international commercial property expo exceeds EUR 4 billion according to HIPA. In addition to Budapest, developments in Debrecen, Miskolc, Pécs, Szeged and Zalaegerszeg are also being presented. The leading developers (Atenor, Futureal Group, Gránit Pólus Group, GTC Hungary, HB Reavis, Horizon Development and Wing) are presenting projects due to hand over in 2020.
direct investment: the development of the industrial and logistic infrastructure; the construction of category “A” office buildings, with a special focus on Hungarian university cities; and the development of a quality hotel infrastructure serving business and health tourism,” Ésik added. The annual expo on the Cote d’Azur is a barometer of how a particular market and region is viewed by international investors and developers. An increased amount of capital is flowing towards the
respective markets. An exception to this trend is Poland, where there is currently no structure for overseas funds. “This is a phenomenon that has not been seen before with local capital representing such a large proportion of investment volume. We expect that, moving into 2020, investment volume will be lower due to the limited supply of investment grade product,” commented Bence Vécsey, head of investment services at Colliers Hungary. According to Árpád Török, CEO of TriGranit, from a positive perspective the growing significance of Hungarian capital gives stability to the market, but this is also a barrier to the entry of other investors; there are pros and cons of it for the market. Hungary is the only country that is expected to see yield compression across all asset classes. Yields for prime assets stood at 5.75% for office,
7.5% for
industrial/logistics and 6% for retail, as of the turn of the year. Elsewhere in CEE, further yield compression is expected in the Warsaw office market, where yields stood at 4.6% as of the end of 2018, in the Prague office market, where prime office yields were 4.75%, and Bucharest, where yields were 5.75%. Despite the favorable market fundamentals, wider issues could impact the markets. “We believe investors in real estate in the CEE-6 have to be increasingly wary of other risks in this thinner air,” Robinson cautioned. “These include an overheating development cycle, labor shortages, progress in the ease of doing business of competitor peers around the world, Brexit and related EU funding cuts, ‘populist’ CEE politics and asset taxation risk. E-commerce and ‘flex-working’ are longer-term disrupters. We see the CEE real estate cycle plateauing in 2019. On the positive, any slowdown will be more like 2000-2002 than 2008-9,” he concluded.
commercial real estate sector as capital looks for a home. As many as
5,400
representatives
of investment and financial companies from 100 countries are attending MIPIM 2019 according to REED Midem, organizers of the four-day event. From the supply perspective, CEE developers and county representatives from for example Hungary, Poland, Czech Republic, Ukraine, Turkey and Russia perceive the need to promote their cities and development projects at such major international property and investment expos as MIPIM and Expo Real in Munich.
“For HIPA, MIPIM is especially important, since it gives us the opportunity to present Hungarian real estate development projects to international investors at one of the most significant events of the sector,” said Róbert Ésik, president of the investment promotion agency.
Key Importance
“This enables us to strengthen our real estate infrastructure, which is of key importance for economic development. HIPA focuses on three areas in the real estate segment which are fundamental for the influx of foreign
Agora Office in Debrecen.
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Labor Shortage in Focus for Cautiously Optimistic CEOs PwC Hungary, in association with Confederation of Hungarian Employers and Industrialists (MGYOSZ), unveiled the eighth Hungarian CEO Survey, which revealed that while 92% of Hungarian company heads had more issues regarding the availability of key skills compared to last year, most are still cautiously optimistic about the success of their own companies. BENCE GAÁL
“Everybody can see the storm clouds,” said PwC Hungary CEO Tamás Lőcsei. “CEOs think that the time has come to focus on their own company, and ride out this still calm period.” Some 90% of the 236 surveyed Hungarian CEOs expected the revenue of their own firms to grow, yet
only
35%
From left, Tamás Lőcsei, Barbara Koncz, and Péter Futó. vast majority of CEOs in Hungary (87%) consider making their own operations more efficient in the upcoming year a key to growth, largely in line with global trends (77%). As conflicts escalate around the globe, Hungarian company heads are wary of both an EU-U.S. (65%) and a China-U.S. (63%) trade war, while globally CEOs are more worried (88%) about the latter. Still, domestically some 34% of company leaders do not plan to alter growth strategies or operational models. Some 48% named Germany as the major target market, followed by Romania (26%), the United States (20%), and Slovakia (18%). The top ten target markets included Czech Republic (16%), Poland (12%), and Austria (11%). “Due to trade conflicts, companies focus on their own markets, which in the case of Hungary means that the Visegrád countries are gaining importance,” Lőcsei explained.
Trending Trio
expected the growth of the Hungarian economy to accelerate, and 30% thought the same about the world economy. The
About 87% of CEOs in Hungary named technological development as one of the three most important trends affecting their company in the past five years.
Some 76% also named demographic changes in that trio, which is
19% more
than the rate of CEOs globally. The third most popular choice (57%) was a shift in global economic power. After the availability of key skills, the second most common for concern was the change in workforce demographics (83%). Rising employee benefits and pension costs ranked third at 72%. Regarding the recent strikes at several companies in Hungary, PwC Hungary tax and legal advisory director Barbara Koncz said, “Strikes show that wage hikes proposed by company boards are well under what employees want. They want a double digit increase.” Contrary to global trends, only 23% of CEOs in Hungary think that retraining is the most important method to combat the labor shortage; world-wide, the figure is double the Hungarian rate. About 27% of those surveyed in Hungary believe that establishing a direct pipeline from education is the way to tackle the issue, making it the most popular option. “Hungarians have been facing the problem since 2014, and have realized
they want to handle it this way instead of retraining,” said Koncz. PwC’s global survey reveals that there is a lingering data gap between the information that companies desire and what they actually get, with company heads in Hungary also showing that there are things to be improved here as well. About 48% of the respondents said that poor data reliability is the chief cause of the gap, followed by an unwillingness of clients to share information (38%), and the inability to quantify external information (33%). Only a little more than half of respondents in Hungary (54%) thought they might fall victim to a cyberattack.
AI Unease
Contrasting with the international picture (40%), only 22% of CEOs in Hungary strongly agreed that AI will change the way they conduct business in the upcoming five years, while 25% disagreed, and 9% strongly disagreed. “We gleaned from our discussions with [Hungarian] CEOs that they feel uneasy about AI. I don’t share that sentiment, but I do agree that AI-based decisions need to be transparent and explainable in order to be trusted,” added Lőcsei. MGYOSZ president Péter Futó emphasized that quality education is indispensable for future success. “Children need to be taught that life is full of changes. With God’s help, they will spend
50-60 years
in the workforce, which will include at least four changes,” he said. Furthermore, Futó added that mathematics, English, and IT should be the cornerstones of business education. Regarding those gathering clouds, the experts at the conference were not so quick to draw definitive conclusions. “Crisis? The CEOs think not yet,” said Lőcsei. “What does the gravestone of the pessimist say? ‘Told you so!’,” joked Futó, while warning against self-fulfilling prophecies.
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Business
Ad Market Continues to Grow, Albeit at Slower Pace
Advertising spend in Hungary reached HUF 259.69 billion last year, with online remaining the most dominant segment and outdoor registering the largest increase, the Hungarian Advertising Association (MRSz) has announced.
How the Advertising Cake was Carved up in Hungary in 2018 1.1%
4.19% 1.1%
8.32%
23.31%
13.2%
Television
Outdoor
Printed press
Ambient
Internet
Radio
DM
Cinema
15.22%
33.57%
ZSÓFIA VÉGH
Increasing from a year ago but slowing down compared to 2015 and 2016, advertisement spending grew 7.77% last year, MRSz announced at the Evolution conference, an event for the advertising industry on February 28. “[...] The higher share of growth came from market advertising spending as the rate of massive and strong state investment in previous years stagnated in 2018,” explained János Gulyás, head of MRSz. Each media type managed to keep hold of the position it achieved in the previous two years; in fact, they all increased revenues compared to last year. TV ad spending grew
less than
1%,
most of which came from the market as state ad spending decreased by 2% for the first time in the past two years. Spending in the print press had grown a lot in 2017, with the association suspecting that such pace was not sustainable, Péter Hivatal, a member of the management of MRSz said. Still, it managed to increase ad spending by 3.5%. Unlike the case with television, market spending in print decreased, Gulyás said. Digital media’s share of the advertisement cake has been in 14-16% range for years: last year it reached 14%. Here, global players have been the main drivers of the growth in the sector, whose overall share has grown to 55%. The outdoor segment saw the biggest increase (up 16.28% from 2017), though much of this growth was due to price hikes players were forced to make as a result of higher taxes. With 15% increase, movie segment came next
Source: Magyar Reklámszövetség
in terms of growth, followed by digital media (up 13.98%). Radio ad spending was also remarkable, with 9.5% growth from last year.
Largest Player
Online ads remained the largest market player, and increased its share in the cake to 33.57% from 31.71% a year ago: spending totaled HUF 90.3 bln in 2017. Except for email, every subsegment grew. Much of the spend has shifted to mobile ad. TV ad spending was over HUF 60 bln (a 1% increase from 2017) – the figures are based on the voluntary data provision of 69 television channels that basically cover all the ad spending, Krisztián Kovács, head of the Hungarian Association of Electronic Broadcasters (MEME) explained. The share of spot ads is 94%, while non-spot ads accounted for the remainder. The increase in non-spot spending, was higher (at 9%) than that for spot ads (0.5%), although they start from very different levels. At 11% (HUF 7 bln), state ad spending remains significant, while advertising revenue from the market
reached
HUF 53 bln.
Changes in state ad spending is important as it does not always follow market movements: in 2018, total spending grew while state ad spending decreased. That the advertising cake is getting bigger is a good thing, but as a share per GDP, ad spending has been
decreasing in the past few years, Gulyás said. By way of comparison, ad spending as a percentage of GDP in Hungary is around 0.6%, while in the United States is around 1.2%.
“Our study shows that every forint spent on advertising result in six forint in GDP growth, so it is worth investing in advertising.” “Our study shows that every forint spent on advertising result in six forint in GDP growth, so it is worth investing in advertising,” Gulyás added. Adverts in the printed press grew by 3.5%, reaching almost HUF 40 bln last year. It is still well below the pre-crisis 2008-levels, and only in the past two years has it bounced back, says Tibor Kovács, head of the Hungarian Publishers’ Association.
Taking the Lead
Daily newspapers continue to take the lead, and this subsector, along with gastronomy and home decor magazines, have all managed to grow for the past three years. Dailies, however, depend to a great deal on state ads (one daily alone received HUF 544 million in ad spending).
The printed press traditionally has two sources of income, with the bulk of earnings coming from subscriptions and newsstand purchases, which still come to more than HUF 100 mln of the revenues publications generate (including revenues related to digital sites’ content). “We have been creating transparency reports for years: it turns out that the top two hundred spenders spend 93% of their advertising budgets on transparent, audited publications,” Kovács said. Within the Visegrad Four countries (the other three being Czech Republic, Poland and Slovakia), Hungary ranks third in ad spending as a ratio of GDP. That needs to be improve through innovative solutions, Kovács said. However, looking at the position of press,
with
15%
of overall ad spend, Hungary has a strong position among V4-members, he added. As said above, the outdoor segment saw the biggest increase last year, in large part the result of price hikes: the construction levy for large billboards forced market players to raise prices, says Szilárd Szelei, head of Out of Hungary Home. For the smaller, so-called city lights billboards, it is rather changing market practices that account for the increase, he added. Consumption has accelerated, therefore campaign goals are achieved within two weeks, as opposed to the previous onemonth period, Szelei noted.
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Budapest Business Journal | March 18 – March 28, 2019
The Case for Gold as an Investment: Part III Les Nemethy concludes his threepart series looking at the arguments for investing in gold.
Warren Buffet eloquently expresses the case for utter disutility of gold: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their heads.” Much as I respect Buffet, gold has acted as a Grand Central Station since at least Roman times. In my own family’s history, my uncle (who was posthumously awarded the Yad Vashem prize for helping dozens of Jews escape World War II Hungary), on his first visit to New York in the
early
Let me start this article with a quote by Ludwig von Mises, famous economist of the Austrian School of Economics, on the subjects of credit expansion and economic cycles: “(An economic) boom cannot continue indefinitely. There are two alternatives. Either the banks continue the credit expansion without restriction and thus cause constantly mounting price increases and an ever-growing orgy of speculation, as in all other cases of unlimited inflation, ends in a ‘crack-up boom’ and in a collapse of the money and credit system. Or the banks stop before this point is reached, voluntarily renounce further credit expansion and thus bring about the crisis… (a) depression follows in both instances.” We have had enormous credit expansion over the past decade (see my earlier column: “Have we learned the lessons of 2008?”). In addition, we have had enormous monetary expansion, with central banks all over the world printing vast amounts of fiat currency, “quantitative easing” being one of the creative techniques used all over the world to dig us out of the 2008 crisis. Keynesians would argue that in times of economic boom, fiscal policies should be tightened. We are into the longest economic expansion in modern history, yet in
December
2017,
the U.S. government significantly cut taxes, further fueling the economic boom.
1970s,
The Punch Bowl
opinion, precise enough sciences to predict Attempts by the U.S. Fed to raise interest timing of such cataclysmic events. rates do not seem to have the support of The next question is if there is a significant the executive branch. No politician wants loss of confidence in fiat currencies, what the economy to collapse under his or her takes its place? My best guess would be gold. watch. The Fed fully realizes that raising Golden Assignation interest rates would take away the punch “Imagine you have an assignation in New bowl that keeps the party going, hence York,” the Economist wrote on February without political backing seems unwilling 23. “You have not been told where you to administer the tough medicine. should meet the other person and she Basically, what von Mises is saying is has not been told where to meet you. You this: the longer we take to remove the have no understanding of where to find economic stimuli, the more pronounced her or where she might usually be found. the downward adjustment will be. She is as ignorant of you. You cannot Given that global debt levels are communicate. You must somehow guess considerably higher than those that how to find each other and make those triggered the 2008 recession, as since guesses coincide. Where should you go? then there has been a huge dose of And at what time of day? quantitative easing, there is a risk “A good answer is Grand Central Station that the next recession might be more at noon… Now imagine the world economy severe than the last. It may even result goes into a tailspin. There is a panic in a significant loss of confidence in selling of risky assets. Where should fiat currencies. you seek safety? Cash is the most liquid I am not saying this is a probability any asset; but which kind? The dollar is a time soon; I am saying this is a possibility, natural focal point. Yet America’s fiscal at some point in the future, that should indiscipline and its sizeable currentbe reckoned with. Forecasting the next account deficit might give pause. Other recession or depression is like forecasting currencies have their faults, too. There is the next earthquake on the San Andreas Fault. We know tectonic forces are building, one other destination you might consider, if only because others are starting to think both geologically and economically, but the same way. And that is gold.” neither geology nor economics are, in my
was amazed at how super-wealthy one of the assisted families had become. They attributed their head start to a small bag of gold coin they had taken with them. To quote Buffet again, yes, an investment in gold amounts to “going long on fear”. But then again, there is much to be fearful about in the world today (see my first article on gold in this trilogy). And then again, if one believes risk is underpriced in the world today, why not invest in gold? Even Buffet was invested in 130 million ounces of silver for many years. Disclosure: Les Nemethy is long on gold coin, gold miners, and gold royalties. He is the author of this article, which expresses his own opinion. He is not receiving compensation for this article (other than from Seeking Alpha, a crowd-sourced content service for financial markets), and has no business relationship with any company marketing or selling gold. This article should not be construed as investment advice.
Les Nemethy is CEO of Euro-Phoenix (www.europhoenix.com), a Central European corporate finance firm, author of Business Exit Planning (www. businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.
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Budapest Business Journal | March 18 – March 28, 2019
Pig in a Poke Tempts Snouts to the Trough Let’s admit it, from the agricultural laborer with his firewood allowance to the company executive with driver and limo, we all like fringe benefits. Against all logic, they make us feel valued and privileged. KESTER EDDY
(Confession – many years ago your correspondent joined British Rail as much for the free travel on the continent as the salary and career.) Just now, the headline perk in Hungary is a pig, or more accurately, a couple of thousand half pigs. This is after Lőrinc Mészáros, owner of Mátra power plant, dished out half cuts of hog to the generator’s 2,100 staff last month by way of a bonus to “improve their lives”, according to news site Index.hu. To the cosseted townie in Budapest, the idea of a hauling home a 100-pound pork carcass, and finding space in the fridge, might seem more a burden than benefit. But, as a caller on a phone-in show on Klubrádió later pointed out, in the countryside, where a pig-slaughter can take the form of village carnival, most
probably saw it as a generous gesture: the gift was valued at HUF 50,000, a significant sum to many. But callers raised other points: Mészáros, of course, is the friend of Prime Minister Viktor Orbán, and a qualified gas fitter who in recent years has seen his businesses blossom, amassing thereby a personal fortune estimated by Forbes magazine to be at least USD 1 billion. In view of this, half-butchered meat to a value of HUF 1 million or so would be little more than “miscellaneous expenditures” in the family accounts. Another caller implied the gift illustrated modern feudalism; it was “accepting a gift from the master”, and the whole affair was downright demeaning.
Porcine Present
Then there is the thorny question of tax: how many think Mátra workers will be entering their porcine present as incomein-kind on their personal income tax forms a year next May?
Business | 9
M LIN E O T T O B E H T Tax wheeze or otherwise, Mészáros’ munificence was probably a one-off, piga-poke benefit (almost literally) and in any case, hardly of significance to the fiscal balance in the grand scheme of things, especially when that scheme itself includes a fully legal tax wheeze. The SZÉP Kártya (“beautiful card”) is the state-controlled benefits-in-kind system. It allows employers to grant perks of up to
HUFper225,000 annum
to cover accommodation, without paying all the additional taxes and contributions levied on the equivalent salary. Easier to handle than half a hog, the scheme is hugely popular among Hungarian employers and employed alike. But is it really right or fair? Sure, it helps hoteliers and its recipients, those with steady, and well paid jobs. But it is disadvantageous to the poor and unemployed: they fail to gain directly, and indirectly suffer, since the tax not collected on these payments could, at least in theory, be channeled to support their relief. Further, valid only within Hungary, it is, in effect, a non-convertible currency, and as
such, deters the free movement of peoples as set out by the EU’s founding principles. Fringe benefit schemes are popular in other countries, of course, not least France, a founding EU member that sees itself as a bastion of European values. For your correspondent, however, they are an irritant and deviation from these principles. Employers should pay workers a proper wage for a proper job, the proceeds of which should be spendable as much in Bergen as Budapest. Back in Mátra, reports say one worker at the generator declined the offer of the half hog out of principle; someone, it seems, was not prepared to put his (or her) snout in the trough. The Bottom Line is a monthly column written by Kester Eddy, a long-standing and well respected Budapest-based business and economic journalist, who has written for the Financial Times and many regional publications. The opinions expressed in the column are not necessarily those of the Budapest Business Journal. To comment on this column, or on anything else in the BBJ, email the editor at robin.marshall@bbj.hu
PROMOTION
The Legendary Spíler Has Arrived in Buda Spíler has conquered a new venue in the Buda Hills! The man behind the brand has brought his unique, enchanted milieu to Spíler Buda at MOM Park. It is about rock, and the spark of life, but in an easy-going way. Beautiful fabrics, glitter, and amazing music await guests all day long. You can choose from wonderful dishes made from the best ingredients, followed by amazing wines from the New World and cool cocktails. After making the big decision to open a third Spíler restaurant in Budapest, Roy Zsidai turned his mind to thinking of a suitable theme for the place. Spíler Buda, which opened at MOM Park in December 2018, was to have a rock ’n’ roll concept, Zsidai decided. He is the head of the Zsidai Gastronomy Group, a Budapest family business with a history of 36 years that runs 20 restaurants, cafés, bars, pubs and two smart luxury boutique hotels in the Hungarian and Austrian capitals and Marbella, Spain.
Spíler Buda would be required to continue this success, and Zsidai compiled a two-hour playlist of classic rock that he listened to as he mulled over various musical design ideas. His staff were bemused to find themselves being played hits by the Rolling Stones, Led Zeppelin, Jimi Hendrix, Deep Purple, Lenny Kravitz and others during brainstorming sessions for the gestating restaurant. The results are there to see, and hear, after Spíler Buda opened for business in midDecember 2018. Drums and cymbals hang from the ceiling and iconic Marshall amps top the pillars. Two guitars, one a Gibson Flying V and the other a Fender Stratocaster, cross their necks behind the bar. A large star dominates the ceiling space, unifying the establishment with the two Spílers in District V. But while those establishments cater for tourists and locals enjoying the Budapest nightlife, this new Spíler is aimed more at the crowd from Districts II and XII. MOM Park is a place where the locals organize their lives: many work in the surrounding offices and they use the shops, banks, phone companies and post office in the shopping center. This is their meeting point and where they socialize with their families, friends
and work colleagues. Spíler Buda aims at being an easygoing sort of place for average people, many of whom will hopefully become regulars. In the restaurant the focus is on steaks and burgers and nibbles that can be shared. A meat cabinet inside the door displays Jack’s Creek Rib Eye Angus and Jack’s Creek Tomahawk Angus from Australia, and Porterhouse from the US. Spain offers Iberico Beef Rib Eye. Hungarian beef is used in the burgers and there are four types on offer: Cheeseburger with tangy sauce and pickles; Spíler Double Burger with maple bacon, cheddar cheese and fried egg; Blue Cheese Burger with porcini mushrooms and creamy blue cheese; and Spicy Tuna Burger with slaw and chili-line mayonnaise.
Spíler Buda is concentrating particularly on lunchtime and after-work business clientele, and there is a set lunch menu with a starter and a main for HUF 2,490, which changes weekly. A breakfast menu is on the verge of being introduced, and this will offer sandwiches, pastries and coffee to eat in at the bar or take away and consume in the nearby offices. Spíler Buda has a unique, wide selection of wines from the New World with bottles from Australia, California, New-Zealand, South-Africa. You can also try our craft beers or our amazing cocktails. Just right, Zsidai figures, for “spílers”, apparently a German word meaning performers/ actors or gamblers/speculators, but also nicely descriptive of “cool people”. Spíler rocks! www.spilerbuda.hu
Business
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Budapest Business Journal | March 18 – March 28, 2019
Sri Lankan-backed Hungarian Airline Taxiing for Takeoff A Sri Lankan-based company with a 50-year history in tourism is launching what it calls “the newest Hungarian airline to take to the skies”: RonanAir. ROBIN MARSHALL
“RonanAir is a scheduled Hungarian airline set to commence operations in summer 2019,” Rihaab Mowlana, media & marketing consultant for the company told the Budapest Business Journal. “Initial phases will see RonanAir fly to approximately 11 European destinations, and consecutive phases will eventually include Asia, the Middle East and the Americas.” Although no schedule has yet been published, the airline’s website (ronanair. com) lists cities in Austria, Bulgaria,
Ronan Air Kft. According to Opten Kft.’s company information database, Ronan Air Kft. was established on August 19, 2014, with its offices in Vecsés. It had zero net revenue listed for 2017
Croatia, Greece, France, Italy, Romania, Switzerland and Ukraine among its “featured destinations”. RonanAir Kft. is owned by the Sri Lanka-based R-Group, which traces its roots back to 1945 and the establishment of Ceylon Carriers by the late Charles Nanayakkara. According to the group’s website (rgroup-intl.com), Ceylon Carriers
(the latest date for which figures are available), and an after tax loss of HUF 1.364 million. Its own capital was put at HUF 5.476 million. There were no employees, with the owner and managing director given as Godaliyanage Rohan Nanayakkara.
handled both goods and tourists, and partnered with many operators in this region, including Ibsuz in Hungary. R-Group is now chaired by Charles’ eldest son, Rohan Nanayakkara, who is also an Honorary Consul of Hungary, a post he has held for 25 years.
Full Service
The business model will be for a full service airline, rather than a low cost operation. Although unable to give exact fares at this stage, Mowlana says ticket prices will “certainly be competitive”, and are expected to go on sale “within the next three-four months”. The airline will fly Bombardier and Airbus aircraft, the spokesman told the BBJ, with staff recruitment currently under way. Although based in Hungary and registered in this country, back office support will be provided in Sri Lanka “in order to facilitate Ronan Air with the know-how and backup of R-Group assets etc. that have been built since 1945.” Nanayakkara is clealy well connected in Hungary. The R-Group website says its chairman is receiving “massive support from [the] Hungarian government in promoting Hungary within and beyond Sri Lankan territory”. That seems to be a two-way street. “We will engage in actively promoting Hungarian culture, cuisine and products in the destinations we will be flying to,” Mowlana told the BBJ.
Fallen Falcon The last attempt to launch a Hungarian airline was Sólyom Hungarian Airways Ltd. (sólyom being the Hungarian for “falcon”), which was founded in 2013 with service initially due to start in August of that year. Its business model was openly questioned by analysts, finance from Oman never materialized, the company declared itself bankrupt in October 2013, and it was sold to Hungarians based in Africa the following month. In March 2014, the new owner apparently shot himself dead as police searched his property. Sólyom Airways has never flown commercially. Hungary’s state-owned flag carrier, MALÉV Hungarian Airlines, collapsed under the weight of its debts in February 2012 after 66 years of continuous operation. The only recent Hungarian aviation success story is Wizz Air Hungary Ltd., which describes itself as CEE’s largest low-cost airline. With its head office in Budapest, it was established in September 2003 and made its first flight in 2004 (from Poland). Its boss, József Váradi, is a former CEO of MALÉV. According to its website (wizzair.com), it carried 2,548,062 passengers in February 2019.
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Bridge Budapest Reaches Milestone, Refocuses Bridge Budapest, the organization which aims to link the educational and entrepreneurial sectors in Hungary, says it has reached a landmark this year with an expand team of seven, all women. Building Communities
ROBIN MARSHALL
“We have many tasks ahead of us, and now we have managed to reach a real milestone,” says Veronika Pistyur, CEO and co-founder of Bridge Budapest. “It took five years to understand what the word ‘bridge’ means, both in our name, and our activities. Connecting people is our true strength,” she summarizes. Bridge Budapest works to connect the internationally competitive, value-based and forward-thinking Hungarian entrepreneur community and educational initiatives. It says its goal is to create a country where knowledge and achievement are the basis of self-confidence, and to encourage long-term value-based thinkers from both the civil and business sectors to merge more eagerly. Bridge Budapest’s expanded team has two main directions from now on, it says: enterprises and children. Bridge Budapest was founded
in
2013
mainly because the people behind it struggled to understand why there were so few globally successful Hungarian startups.
“We were dumbfounded, along with the founders of LogMeIn, Prezi and Ustream. We felt we should do much, but haven’t seen any patterns for anything similar. We decided to prove to people by telling lots of success stories that, indeed, this can be done. We also started building communities, where people could experience that, now, they are not alone anymore,” Pistyur explains For 2019, Bridge Budapest has created what it calls the Edison platform, which will debut this spring, and is, the organization says, a unique initiative in Hungary that helps knowledge-based, innovative participants working on preparing children for the future connect and cooperate. One of the main scope of activities of Edison platform will be the continuing Bridge Bizniscool, launched in 2017, since when it has organized summer camps for
600 children
aged 8-12. Bizniscool’s activities are targeted to reach even more children this year, with an extended curriculum.
Its experience-based entrepreneurship workshops enable children to acquire an entrepreneurial approach and to get familiar with the inner workings of an enterprise in a playful manner. These sessions encourage children to step out of common frameworks and try out what it’s like to let their creativity soar, as well as show their ideas to the world. The aim of Bridge Budapest’s Vállalható Vállalkozás (Aware Entrepreneurs) project is to show that it is both possible and worth it to create value based on business. The aim is to demonstrate to an ever-growing audience through personal success stories that there are many valuable and likeminded companies in Hungary. One of its goals is to kickstart initiatives that may have positive social or economic effects, with a level of cooperation as wide as possible.
The Bridge Budapest Team Beyond CEO Veronika Pistyur, the team for 2019 includes: Nikolett Barta (in 2017 Forbes Hungary listed her among their 30 successful people under 30) and Lili Gréczy (who joined in fall 2018), project managers of Edison platform and Bridge Bizniscool; Dalma Kormos (who joined in January), communications manager; Rita Veres (named female manager of the year in 2016), strategy manager of Edison platform; Réka Matheidesz (co-founder and CEO of WAMP Design Fair for eight years) and Veronika Zana (who also leads the scholarship program), project managers of Vállalható Vállalkozás (Aware Entrepreneurs).
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Budapest Business Journal | March 18 – March 28, 2019
Business | 11
Online Stores Take Growing Slice of Fashion Market When shopping for clothes, most people in Hungary still prefer traditional shops; indeed, last year, turnover grew to more than HUF 550 billion in fashion retail stores. However, traffic in online stores is growing significantly faster. According to a recently published research, the market share of online retailers could reach 28% by 2022. ZALÁN ZUBOR
Glami.hu, a Czech Republic-based company known for its fashion-themed search engine, published its findings a few weeks ago, providing insight into some recent trends in e-commerce. “2018 was the year of online fashion trade,” the report insists. According to its data, the revenue of online retailers is growing significantly faster than offline counterparts. In 2018, online retailers active in Hungary made
more than
HUF 153 bln,
a 12% growth compared to the figures for 2017. Already online sales account for 22% of the sector’s market share. This, according to Glami, could rise in the next four years to 28%, bringing in a total of HUF 229 bln in revenue. Looking at customer preferences, it seems unlikely that online stores will ever fully
H&M is the leading online retailer in Hungary. Photo by Shutterstock.com. replace bricks and mortar fashion stores. The majority of those who buy clothes both online and offline say they still prefer traditional shops, with only 28% giving a preference for web shops over physical ones.
Convenient Alternative
For many, buying online is little more than a convenient second choice over going to traditional stores. When asked about the advantages of using online stores, 61% of those surveyed by Glami said that the main advantage of online stores is that they can use them even when offline ones are closed. Some 51% said that they shop online to save time, while only 47% praised online stores for having a wider selection and 35% for better pricing. When buying fashion items online, the main concern is always the possibility that the clothes will not fit. Many web shops address this problem with a return policy, where they will take back and replace an item if requested. This is one of the areas where more localized web shops have a clear advantage. While ever more people order clothes from abroad, many (28% of those surveyed) say they are hesitant to order from foreign stores due to unclear return policies and long or expensive shipping processes (18% and 16% respectively).
The vast majority of shoppers (87%) prefer Hungarian language websites, regardless of where the company’s warehouses are or where they are based. The lack of a Hungarian language option is commonly associated with questionable quality:
59% of those
surveyed said that they do not trust the quality of products that they ordered from shops with only a foreign-language website. Not surprisingly, the online fashion market is dominated by multi-national retailers that have web stores in Hungarian. The leading online retailer is Swedenbased H&M, a well-known fashion chain with many physical stores all over the country. However, the second most popular one is Hamburg-based Bonprix, a company that only serves online orders. While competition between multinationals is intensifying, the growth of the market does still allow smaller, new competitors to rise. One example is Ecipo. hu, a Hungarian web shop offering shoes and accessories, which was already the third most popular fashion retailer in 2018.
Sneaker Mania
According to Glami’s research, the three most important trends in the Hungarian
online fashion market are sustainability, local brands and a “sneaker mania”. While brands that use ethical supply systems and nature-friendly processes are not among the market leaders (since these are usually not the most well-known brands), research shows a correlation between the growth of sales and how much the brand communicates sustainability. This means that some brands could increase sales if they advertised their commitment to sustainability more clearly or adopt such policies if they haven’t yet done so. Generally, people are willing to spend more on fashion products that were manufactured using sustainable methods. In Hungary, 67% say they are willing to pay more for “ethical products”. But while many people are willing to pay extra for more environmentally friendly products, fewer shoppers want to pay more just to support local manufacturers. While consumers are interested in Hungarian brands,
83% are
interested in buying local only if they find the price reasonable. Only 8% said that they are willing to pay more for a clothing item that was created by a Hungarian designer.
According to Glami’s research, the three most important trends in the Hungarian online fashion market are sustainability, local brands and a “sneaker mania”. Glami’s research also shows that athletic clothing is still the most popular choice of style in Hungary: 60% of its users say they prefer to wear such cloths for daily (nonathletic) activities. Sneakers are especially popular, with many consumers choosing them for work or even formal events. Sneakers are the single most popular fashion item right now and are responsible for more than double the volume of the second most popular item: sandals.
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2019. 01. 25. 16:52
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Budapest Business Journal | March 18 – March 28, 2019
Special Report Bank Sector Improves Despite Challenging Times
The Hungarian banking sector has been on an upward curve recently, with record profits. Banks expect lending activity to pick up and give a further boost to the industry overall, market players tell the Budapest Business Journal. CHRISTIAN KESZTHELYI
“The Hungarian banking sector has improved significantly in the past years. It reached an all-time record profit of EUR 2 billion in FY17 and an outstanding result is also expected for FY18. Nevertheless, we see challenges in mid-term about the sustainability of the current profit level,” MKB Bank tells the BBJ. According to MKB, the local sector is fragmented with a low level of concentration. The bank says that, compared to the size of the economy and number of clients, the market has “too many universal players”, while cost efficiency is also lower compared to other EU markets. This sentiment is spiced up by increasing competition among banks in the past years in all segments, MKB adds. “In line with the economic upswing, consumer loans and mortgage loans have picked up rapidly;
in
2019,
the focus is on the new Funding for Growth program of the National Bank [of Hungary] in the corporate segment,” MKB adds. UniCredit Bank is optimistic about the health of the local market, however. “In line with robust economic performance, nice corporate opportunities as well as buoyant consumer confidence, business opportunities for banks have improved markedly in recent times, adding to auspicious banking sentiment,” the Italian-owned bank tells the BBJ.
High Credit Demand
“Recovery of volumes is fueled by high credit demand amid a healthy and sustainable indebtedness level. Also, banking profits have registered eminent
figures lately, although it must be noted that several notable one-off factors added to high returns, which will by nature fade going forward,” UniCredit adds. Despite an anticipated slow down, CIB Bank, which also has an Italian parent bank, still expects growth in the market. “Although more modest than in 2018, we expect growth in personal loan and mortgage loan applications in 2019 as well. The reason for this is, on the one hand, that real wages are rising and, on the other hand, that demand in the housing market
“At Budapest Bank a few months ago we saw a turning point: our clients already spend more money using their bank cards than they withdraw from ATMs. At the same time, card usage is on the rise, while the ATM usage stagnates.” is expected to remain high, not only affecting housing loan applications but also driving demand for renovation and furnishing related to property purchases,” a CIB Bank spokesperson tells the BBJ. Budapest Bank, formerly belonging to GE Capital, but now state-owned, also expects the lending market to pick up.
“In 2019 we expect the lending market to grow, and similarly Budapest Bank to increase its lending activity,” the lender says. It considers profitability to be the biggest challenge; the bank believes growing competition puts increasing pressure on pricing, and therefore margins.
Consumption Realized
“In the retail banking market, there is a strong demand for loans by private individual clients, which is increasing dramatically year-on-year [with doubledigit growth], both for consumer loans and mortgages,” UniCredit explains. “This is fueled mainly by postponed consumption of households after the crisis, which is being realized now. Another driver the heavily increasing price of new flats and houses.” As for the corporate market, the banking sector is vital in supporting the current economic cycle, which is characterized by higher economic growth and a low-interest rate environment, UniCredit believes. “This adds up to an above average growth rate in corporate loans, adding financing for investments in the corporate sector for capacity increase and innovations,” UniCredit adds. “While the corporate lending market, in general, showed very dynamic growth recently in an expanding market, the level of competition has remained very high. The current cycle increases the outflow of loans to the corporates, reaching all segments,” the bank says. Banks operating locally also need to keep a close eye on how emerging technological solutions affect the market and change customer behavior. Although the popularity
of mobile banking is on the rise (see “Hungarian Banks Embrace Digital Race for Customers”, Page 14), cash payments still
“The Hungarian banking sector has improved significantly in the past years. It reached an alltime record profit of EUR 2 billion in FY17 and an outstanding result is also expected for FY18. Nevertheless, we see challenges in mid-term about the sustainability of the current profit level.” rule the Hungarian market. Card payments are on the up, however, Budapest Bank says. “While cash payment is still the most dominant form in Hungary, both with regard to the number and the value of transactions, statistics also show that the annual value of payments using debit and credit cards is on the rise. At Budapest Bank a few months ago we saw a turning point: our clients already spend more money using their bank cards than they withdraw from ATMs. At the same time, card usage is on the rise, while the ATM usage stagnates,” the bank spokesperson says.
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Budapest Business Journal | March 18 – March 28, 2019
Special Report | 13
FinTech to Help Onboarding and the art of Conversation them to gain crucial information about clients. Now apps kill interaction and they restrict customer activity to the minimum, while providers learn nothing about their most valuable assets,” says Kuthy.
A Hungarian IT firm says it has next generation banking solutions to reinvent both digital onboarding and customer service for banks and beyond. LEVENTE HÖRÖMÖLI-TÓTH
Banks are busy embracing the latest set of e-solutions that help enhance the customer experience and cut operational costs. However, while many clients may prefer to get their bank-related business done on the move or from the comfort of their home, financial institutions have all kinds of bumps to keep an eye out for on the road to online conversion and customer service. Antal Kuthy, CEO of E-Group has set out to address those issues. “Registering a new customer is just a start, albeit an important one. If the process is seamless, it already says a lot about you as a service provider,” Kuthy points out. “But you need to go further than that: it is even more crucial how you can sell your products in the most convenient manner possible.” Remote onboarding is subject to a bunch of strict regulations such as so-called know your customer (KYC) and anti-money laundering compliance. KYC refers to the process of verifying the identity of your customers, but it also references regulated bank customer identity verification practices to assess and monitor customer risk. Money laundering must also be prevented, clearly. Add the burden of fighting fraud, and it makes a handsome list of requirements banks are faced with.
AI-assisted
But precautions are well-founded. According to a report by Javelin Strategy & Research, there were
16.7 victims million
of identity fraud in 2017 just in the United States, and the amount stolen by fraudsters hit USD 16.8 billion. Being aware of the above, E-Group has developed IOX, which verifies the online identity of customers using eIDAS, a set of standards for electronic identification and trust services for electronic transactions in the EU. As a result, online onboarding could not be easier.
E-Group’s Edge
“We have the edge here since our company implemented the software framework for the official public authentication and identity attributes exchange system in Hungary, which is also applicable in all member states. This is what IOX integrates,” Kuthy notes. The solution is production-ready in a test phase. All you will need is an eID card or a digital public gateway account (a so-called ügyfélkapu in Hungarian), while proof of presence is verified via a video chat module. Embedded facial recognition technology is connected with the eID card, with an official EU passport facial image providing support for the remote verification process. The onboarding process ends with a legally binding digital signing e.g. an electronic contract.
Antal Kuthy, CEO of E-Group. The cross-border applicability of the product also gives the company reason to dream big, as does the fact that banking is just one potential target area. “Right now if a Portuguese resident wants to set up a company in Hungary, a lots of paperwork needs to be provided, mostly via post. The same goes for Hungarians wanting to register with, say, the German tax authority. Thanks to the interconnectivity of national public registers, identification will be possible online and fast,” Kuthy explains. Players in the shared economy can also benefit tremendously, as does anyone who wants to rent a property, but doesn’t wish to be present at signing a lease contract or can’t get there. Financial institutions also face the problem of it being harder to have a conversation with their customers. “Before the digital age, face-to-face meetings with account officers allowed
E-Group’s other product, Xanta is meant to compensate for that lack of provider-client interactivity. Its AI-assisted front-end solution replaces either a human operator or menu-driven client interactions with customer service by intelligent natural language conversation. “It’s a transaction-oriented, dialoguebased scheme, and most importantly, it uses natural language, which makes it very human. So no more need to press buttons,” Kuthy promises. Xanta guides you through the process and leads you to wherever it is you were meant land. Since it’s a hybrid solution, a human operator can be also engaged, yet only if absolutely necessary. The dialogue-based feature allows you to ask questions and, preferably, complete the desired transaction without the intervention of an operator. Use cases range from banking to all kinds of services such as medical care or public administration. Xanta can prepare the ground for a medical check-up or an authority matter by doing the preliminary Q&A with the person at the other end of the line. Possessing the background facts, the physician or the civil servant can then keep the actual appointment as brief as possible. Both Xanta and IOX are products of international cooperation with European funds involved via leading innovation organization EIT Digital. The tech integration is done by E-Group, while two dedicated startups are responsible for executing the go-tomarket strategy. One regional bank has already signed up to integrate the solutions, so, although Kuthy won’t yet say who the client is, it should not be long until you can market test their practicality first-hand.
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Budapest Business Journal | March 18 – March 28, 2019
Hungarian Banks Embrace Digital Race for Customers Silicon Valley-based FinTech startups now offer banking services on mobile phones without the need for meeting clients faceto-face. Such apps are coming to Hungary too. The Budapest Business Journal discusses the latest technology trends with some of the biggest banks in the Hungarian market. CHRISTIAN KESZTHELYI
A few years ago, industry insiders seemed wary about the technological capabilities of the banking sector – not just in Hungary, but globally too – at an international banking summit hosted in Budapest. Professionals had an eye on PayPal’s online dashboard, comparing its user-friendliness and swift nature to sluggish online banking solutions from traditional banks. Today, the threat is even graver; tech startups with the potential to grow into tech unicorns, such as U.K. financial technology company Revolut, are ready to offer a mobile application-based banking experience, without the need of operating brick and mortar branches. A user can open a bank account in ten minutes, including the application for an embossed bank card, that arrives by post in less than a business week. Through the app, users have full control over their accounts, at the flick of a finger. Banks, internationally and in Hungary, need to keep up with the latest technological advancements. “To enhance our agility and our customers’ satisfaction, MKB started its digitalization strategy four years ago,” a bank spokesperson tells the BBJ. “Since then, we have replaced our core system, set up our innovation lab (MKB FinTechLab) and introduced new digital solutions for our customers (e.g. online bank account opening, paperless contracting for new accounts).” MKB is quick to add that it sees the current technological progress as an array of possibilities, rather than threats. The initial days of clumsy online banking solutions that were heavily internet browser dependent, often bringing more pain than merit, appear to be over. Banks in Hungary now offer
mobile banking applications, and user numbers are growing gradually.
Native App
“UniCredit Bank Hungary launched its native mobile app in 2015 following a successful ‘Family and Friends’ internal testing period on iOS and Android platforms. By the end of 2018, our bank has reached
120,000 contracted
clients just in the private individual segment. The popularity of our mobile application is clearly shown by two figures: more than a half of our contracted clients are active on a monthly basis, while on third of our active client base is active on mobile,” the bank tells the BBJ. But this tendency of people turning to technology does not mean physical branches have becomes obsolete. “Our experience at CIB Bank is that branches are increasingly becoming locations for advisory services, while more and more financial transactions are diverted into digital channels, although customers still like to visit branches on business that they could otherwise handle online, as they prefer professional support and help from our colleagues,” the Hungarian subsidiary of Intesa Sanpaolo explains. “Employees working in branches therefore also have an important role in educating our customers: in many cases, they help customers try out some unique features available in our mobile app, such as applying for a personal loan with disbursement available as quickly as in seven minutes,” CIB adds. Beyond going online, Budapest Bank says it puts a particular emphasis on the user experience. The bank launched its online app in 2017 and says it garnered such good ratings that it made the solution the second best banking app for both iOS and Android systems.
“Last year we introduced two new services: we launched a contactless mobile payment service (available through our mobile banking app), and we were the first bank in the country to introduce the payment of yellow and white postal checks by scanning the QR code. New functions
“Hungarians are sometimes early adopters [...]. For instance, contactless bank cards swiftly became popular among users, but we also have to note that the amount of physical cash is at a record level of more than HUF 6 trillion, mostly held by households, according to the National Bank of Hungary. This is why it is difficult to predict the adoption rate of FinTech solutions.” have already been introduced to the app this year, and more are expected in the following months,” Budapest Bank adds.
Digital Transformation
Keeping up with the pace of innovation, OTP Bank has launched a comprehensive Digital Transformation Program for a seamless transition to digitalized services, as well as the simplification of processes. “Over the past four years, OTP Bank has completed dozens of digital projects,
including a revamp of its mobile banking offering and the introduction of online sales of cash loans, which now account for
approximately
20%
of new loan production. Today, more than one million Hungarian clients bank online and more than 400,000 use mobile banking,” the largest Hungarian-owned lender says. While Hungarians do appear to be tech-savvy, the market is far from black and white, and sometimes it is difficult to see trends. “Hungarians are sometimes early adopters when we talk about technology. For instance, contactless bank cards swiftly became popular among users, but we also have to note that the amount of physical cash is at a record level of more than HUF 6 trillion, mostly held by households, according to the National Bank of Hungary. This is why it is difficult to predict the adoption rate of FinTech solutions [in Hungary],” MKB Bank explains. User-friendly digital solutions make the life of clients more comfortable. All the banks talking to the BBJ agree on the fact that the needs of clients must be the primary focus of banks, whether the interface is digital or brick-and-mortar. “Based on the complexity of the challenge and the personality of the customer, not each of these needs is to be solved in the digital space. Although people don’t like waiting in long lines to be served, there are some services, especially complex advisory services where the customers expect personal assistance,” MKB Bank points out. OTP clearly agrees: “It is also important to stress, that the group has no plans to abandon its physical branch network, in Hungary or elsewhere. The reason for this is that personal contact with clients is still of crucial importance and the professionally well-prepared advisory work of our employees is in great demand amongst our clients,” it says.
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Budapest Business Journal | March 18 – March 28, 2019
Special Report | 15
Inclusivity, Openness and a Meritocracy In a first, exclusive interview with the Budapest Business Journal, Citi’s Kevin A. Murray reflects on a strong year for the bank in Hungary, being shortlisted for the Expat CEO of the Year title, and combating the labor crisis.
in Hungary this year), which in 2018 saw more than 430 people here provide food and toys in partnership with the Hungarian Food Bank for those less fortunate.
Openness and Diversity
Kevin A. Murray (left) receiving his BBJ Expat CEO runners’ up certificate from editor-in-chief Robin Marshall.
ROBIN MARSHALL
While 2018 was a good year for Citi in Hungary, the status of the business here as a branch of Citibank Europe Plc., based in Dublin, makes it difficult to report exact figures. If that is a frustration for a business journalist, it is equally so for Murray, a self-confessed “numbers man”, who is both country head for Hungary and CEO of what the bank calls its CE5 Cluster: Hungary, plus Bulgaria, Czech Republic, Romania and Slovakia. “Year-on-year growth was good, but I think from our foundation in Hungary in 1985, we have managed to develop the business every year, that is what is really important,” Murray explains, speaking in his Bank Center office, overlooking Parliament. “This year, we saw significant growth in our ecommercial and global subsidiaries businesses, with double-digit growth in both. Treasury and Trade Solutions – cash management, in particular – saw stellar growth. In CE5, and in Hungary to a lesser extent, we saw growth in this sector for the fifth consecutive year. The one area where we underperformed was in Markets, but we saw that everywhere; this is more a global phenomenon rather than a Hungarian issue. That will right itself this year, hopefully.” Citi has something of a reputation for being a champion of digitalization, and Murray says that will only grow. “In 2017, B2B trade globally was about USD 21 trillion. E-commerce is responsible for
around
35%
of that. Any bank, any business, has to be involved in that world. Whatever line of business you are in, you are going to be seeing more and more of this. You have to be ready for it, not just reacting to it.” And how does Hungary compare? “There is growing awareness here. The Minister for Innovation and Technology
[László Palkovics] sees a lot of areas where it needs to be embraced. You have innovative companies that are doing a lot. We are seeing FinTech companies developing here, several of which we are working with, and e-commerce is becoming more wide spread.” Citi will do all it can to help aid that spread, Murray says. “One of our mantras here is ‘How can we best serve our clients?’, and sharing our digital experiences is one of the ways we use ‘thought leadership’ to help keep our clients – regulators, industrials, financial institutions and SMEs – up-to-date with what is happening in the global market.”
Brand Awareness Helps
Citi launched its service center in Hungary with
55
people;
today it has more than 2,000. And just like everyone else, the bank has to deal with what is now a regional labor crisis. Murray does not deny the challenges, but is upbeat about overcoming the problem. A lot is done around helping mothers return to work, for example, but brand awareness is also a huge help, he says. “People know Citi: if they are looking, there is a good chance they will want to talk to us. We offer mobility of career; in Hungary, if that is what you want, or outside Hungary if that interests you. All jobs are open to anyone to apply, and we consider all applicants. That helps build trust, and explains why so many people build long-term careers here. Our core values are appreciated: inclusivity and openness. Above all, we are a meritocracy: you know you will have a good hearing, you will be taken seriously. And the mobility side also works in our favor. If we have a critical position I am struggling to fill in Hungary, I can call on Citi’s global resources to help fill it.
Certainly, there is no shortage of people putting their hands up.” Interestingly, he also argues that shared service centers in Hungary are transitioning away from one-size fits all models towards something more nuanced. “I think you are going to see more specialization. Rather than offering all the roles in one center, people are going to start focusing on what functions they do best, perhaps technology or innovation, and where they can find
“In 2017, B2B trade globally was about USD 21 trillion. E-commerce is responsible for around 35% of that. Any bank, any business, has to be involved in that world. Whatever line of business you are in, you are going to be seeing more and more of this. You have to be ready for it, not just reacting to it.” the people they need to do that. That will also make it easier to create value added roles […] and it will also help with recruitment.” Something else that helps with recruitment is appealing to Millennials’ wider interests. Murray explains that corporate and social responsibility has long been part of Citi’s commitment to give back to its communities, and this promotion of strong corporate values is appealing to many younger employees. Citi runs a Global Community Day across the business (it will be on June 1
“We worked with Rehab Critical Mass [which calls attention to the importance of an accessible society]; we were one of the largest corporate groups at the Health Bridge [where Chain Bridge is lit pink for breast cancer awareness]; we were the largest group of marchers at Budapest Pride; we are on the board of WeAreOpen [a Hungarian organization that promote openness and diversity].” The bank also gets involved with education in Hungary. Its Junior Achievement program has, thus far, given
2,000 students
entrepreneurial skills. The Citi Foundation has given a grant focusing on financial education and entrepreneurial skills to United Way. “And that CSR goes all the way into higher education. We have had a relationship for more than ten years with Corvinus University: I am on the advisory board; our Citi Finance team teaches corporate and investment banking skills. At Óbuda Technical University we teach cyber education; we run a course in Budapest Business School from which, in 2017, 86% of the people who attended graduated.” These actions help educate and prepare young people for the workforce, while also giving Citi access to students, as well as the ability to drive the curriculum, which will in turn help with future recruitment. “Without that sort of input, we can only ride the wave and hope it takes us somewhere good. We believe that our ability to help shape the curriculum drives better outcomes for everyone.” Given such a multi-layered level of engagement, it is not surprising Murray was shortlisted for the BBJ Expat CEO of the Year title. He insists it is a case of building on the success of others. “It is recognition of three decades of work since Citi first came to Hungary in 1985. It is recognition of the work done by all those who have been part of our franchise and served our clients over the years. We were the first non-government financial institution to do local currency clearing. We helped develop the financial industry in Hungary, and the country itself, but Citi also gained a lot out of that relationship. For me, personally, it is much the same. I benefit from being part of such a talented team. To have been one of five CEOs shortlisted is incredible recognition, and I am very proud, especially for the 2,400 people working for Citi in Hungary today.”
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Special Report
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Budapest Business Journal | March 18 – March 28, 2019
EIB Financing for Hungary at Record EUR 891 bln in 2018 be utilized for any purpose”, but focused on “clear projects and clear expenditure lines of these public institutions”, as opposed to general budget financing “that can be used for any purpose”. Moreover, EIB projects and documents always require adherence to European
The European Investment Bank, the financing arm of the European Union owned by the member states, provided loans to Hungary worth a total of EUR 891 billion last year, with the promise of more to come.
“The results for the last year, were very good; it was a record year in terms of volume of operations. The overall EIB financing was EUR 891 mln, which puts Hungary at a very high level of the countries in Central Europe.”
KESTER EDDY
norms. “Financing is done based on this assumption, and we follow the utilization of these projects, [which] requires adherence to EU standards of procurement and overall project management,” he said. “From our perspective, we have sufficient influence and assurance that our funds are not misused or part of any corruption paths.”
Vazil Hudák, the EIB’s vice president, was in cautiously optimistic mood at the bank’s annual press conference for Hungary, held in Budapest on March 7. This was despite what he termed “a quite challenging” year for the bank as a whole, mainly caused by concerns over Brexit, which caused a dip in total lending. (See “EIB Lending hit by Brexit”.) Regarding Hungary, the numbers do look impressive: the bank itself had sealed loans
EIB Lending hit by Brexit
worth
EUR 747 million
last year, up 6% on 2018, for ten projects, including EUR 276 mln for transport and EUR 146 mln for the energy sector. In parallel, the European Investment Fund, the EIB’s arm supporting entrepreneurship and innovation in Europe, posted its fifth consecutive record year in Hungary, more than doubling its financing operations compared to 2017, from EUR 70.1 mln to EUR 144 mln. “The results for the last year, were very good; it was a record year in terms of volume of operations. The overall EIB financing was EUR 891 mln, which
Vazil Hudák of EIB. puts Hungary at a very high level of the countries in Central Europe,” Hudák said. The bank also achieved another record in 2018 by contracting EUR 355.4 mln in Hungary under the European Fund for Strategic Investments, the financial pillar of the so-called “Juncker Plan” launched by the European Commission and the investment bank in 2015 to help attract investments into higher-risk projects than is usual for EIB lending activity.
EIB Involvement in Budapest-Warsaw High-speed Rail Project The Visegrád Four countries (Czech Republic, Hungary, Poland and Slovakia) have invited the EIB to advise on the creation of a highspeed rail line linking all four capitals, Vazil Hudák told the BBJ in an emailed response to questions. The plans are for the line to link Budapest, Bratislava, Brno (with an extension to Prague), and Warsaw “at a top speed of more than 250 km/h,” Hudák stated, giving muchneeded connectivity on a northsouth axis between these important population centers. The project is currently at an early stage, with each country preparing and financing its own feasibility study for the sections on its territory, although in general, there is a willingness to
use the same assumptions and inputs into the feasibility studies, he wrote. However, in what could be taken as a warning that such individual planning might lead to future difficulties, Hudák added: “...given the cross-border nature of this project, EIB strongly recommends to also undertake an international high-level feasibility study, [in order] to address the international issues, which could then attract significant EU support, and avoid many delays in the project implementation.” Hudák gave no estimate of the overall cost, saying only that it would be “extremely challenging, spanning many years and involving significant financing”.
Airport Development
Among the projects to benefit from this broad wave of financing, Hudák highlighted the EUR 200 mln committed to the development of Budapest’s Liszt Ferenc International Airport and EUR 100 mln for the modernization and expansion of the high-voltage national grid. At the other end of the investment scale, EIB facilitated support worth EUR 20 mln for Aimotive, a Hungarian start-up focusing on selfdriving cars and their IT infrastructure, which Hudák described as “one of the pioneers” in its field. For the future, the EIB has been active in promoting the proposed high speed railway linking Budapest to Warsaw (see “EIB Involvement in Budapest-Warsaw Highspeed Rail Project”), a missing piece of vital infrastructure for the development of the Visegrád countries, Hudák argued. In spite of the push into supporting smaller, private enterprises, he admitted that most of the EIB’s financing,
some
85%
over the last five years, has been into large, public sector projects. In view of this, and given the persistent allegations of kleptocracy and poor performance of Hungary in terms of corruption (e.g. the annual Transparency International rankings), the Budapest Business Journal asked if the EIB be sure that its loans are not used to enrich business people with close connections to the reins of power. In response, Hudák said that EIB financing is “not general financing that can
The European Investment Bank’s total lending to all countries last year, at EUR 64.2 billion, dipped slightly compared to 2017, in part due to preparations for the departure of the United Kingdom from the bank’s shareholders, and hence also from lending portfolio, said Vazil Hudák. “To give you some comparison, in normal years we financed projects in the U.K. to a value of EUR 7 bln [close to 11% of the total], but last year it was only around EUR 2 bln. We have been declining our level of financing operations in the U.K. in preparation for Brexit,” the EIB vice-president told his Budapest press conference on March 7. While the remaining 27 EU member countries have agreed to replace the UK’s EUR 3.5 bln in capital in the bank, it is currently a “very sensitive time” to ensure that British departure would not negatively affect the EIB’s ability to continue working effectively, he added. A second cause of the lending dip was the good performance of the EU economies. “The EIB focuses on filling the ‘market gaps’ in the European economy and there were fewer gaps last year, so activities also slowed down as a result,” Hudák said. The EIB plans to lend some EUR 63 bln in total this year, more or less unchanged from 2018.
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Budapest Business Journal | March 18 – March 28, 2019
K&H Reports Strong Year’s Growth December, the proportion of fixed-interest mortgages had reached 91%, which is almost double the figure it was during the same period last year. Moving on to digitalization and transformation, Moucheron noted the K&H is market leader in taking cash in through its ATMs. “With more than 200 ‘cash in’ ATMs, our network is the largest in Hungary. The ATMs have proved a success; by the end of 2018, 59% of deposits were paid through these machines.” In addition, the bank is rolling out cash-free branches: 20% of the network (40 branches) now operate this way.
With record profits and some innovations unique to the Hungarian market, K&H Bank ended a last year with a strong financial performance, the CEO said in announcing the group’s figures for 2018.
Paperless Processes
ZSÓFIA VÉGH
The banking group realized HUF 57.8 billion net profit in 2018, up from HUF 41.8 bln in 2017: a 38% increase, year-on-year. Excluding exceptional gains from property and financial instruments transactions, K&H recorded a HUF 53.6 bln net profit, a 28% increase y.o.y. There was no slowdown in the fourth quarter either. “We would qualify 2018 as a strong financial performance,” David Moucheron, CEO of K&H Group told reporters. The bank managed to grow both deposits and loans, with the latter
David Moucheron growing faster (7%) than deposits (4%). As a result, K&H’s loan-to-deposit ratio has improved, which is a good thing considering that it has been very low in the entire market, Moucheron said. Another positive the CEO highlighted is the development of the lending market: by
Another innovation where K&H is leading the pack in Hungary is introducing paperless processes in branches, whereby clients can sign documents electronically, Moucheron said. “We have more than 174,000 clients with a biometric profile; on average they sign 60% of all their documents electronically,” he said. The bank recently launched a fully digital cash flow imbursement system where a client can find out within 30 minutes not only whether they can get a loan, but also the money itself in the case of a positive decision. The system is also open to non-clients, which is unique in Hungary, the CEO noted.
Special Report | 17 K&H continues to contribute not just to the economy, but also to the transition to the green economy. Last year the bank granted HUF 380 bln in new loans, of which HUF 250 bln went directly to business clients. “Not only was that money made available to our clients , we also insured it was easier and faster for them to get it by creating a more efficient process,”
“With more than 200 ‘cash in’ ATMs, our network is the largest in Hungary. The ATMs have proved a success; by the end of 2018, 59% of deposits were paid through these machines.” Moucheron said. Clients were given a response within two days in 40% of applications, he added. In 2018, K&H Insurance also saw strong growth; with a HUF 4.5 bln net profit, it registered a 57% increase, y.o.y. “We see an increase both in the total number of clients, reaching almost 700,000, and the ratio of clients who regularly transfer their income grew by than 7% in absolute terms.” Some 4,000 businesses joined the bank in 2018, including SMEs and large corporations, he added.
PROMOTION
A Sweet Treat for Business Partners The Szamos downtown confectionary, located in one of the city’s most beautiful buildings, offers business lunch and a calm environment for a relaxed discussion or a company event. Szamos opened its Vörösmarty tér confectionary in 2012 in a more than 100-year-old building. It has since become a landmark with its Vienna-style coffee
What makes this venue especially suitable for meetings with a business partner is an opportunity for a great selection of breakfasts and a quick but nourishing business lunch, available at reasonable prices compared to the price levels elsewhere in this prestigious and popular neighborhood. It also offers a uniquely wide assortment of artisan pralines and gift boxes, while the decorative dessert plates are only available in this particular Szamos confectionery.
Seasonal Offerings
specialties, high-quality confectionery, and a wide array of French and Hungarian desserts. All of these, accompanied with great and welcoming service, are the background for a stylish meeting place. “This is the ultimate café location for those who prefer to avoid the touristy, but are still interested in the 100-yearold beauty of the architecture, with an appetite for quality,” Ádám Kelényi, managing director said.
Besides its all-time favorites, the café has a selection of seasonal offers, both regarding the variety of coffees and hot chocolates, as well as dessert plates. The high-ceilinged, beautifully decorated venue harks back to the best days of the café culture of the Austro-Hungarian Monarchy. It offers 25 tables and can seat 100 people altogether, but it still manages to remain cozy. The inner hall is available for private events, family and business alike. It is also the location of the famous
Chocolate School where the masters of comfit-making let people in on some of the secrets of their trade. A renowned team-building venue for companies, the school maintains the look of a traditional workshop from the early part of the last century. The branch is located in a downtown UNESCO World Heritage-listed building that was designed by famed Hungarian architect Ignác Alpár (1855-1928). The walls are decorated with three sizeable ‘porcelain pictures’ that depict the
traditional and modern features of the Herendi Porcelain Manufacture and Szamos, created by artist Eszter Domé. Szamos is one of Hungary’s most renowned family-run businesses, going back to 1930. It has a countrywide network of 22 shops plus one in Vienna, the capital of cafés. The Vörösmarty tér venue is unique in the sense that it also appeals to locals, despite the touristy location, since the service, food and prices remain close to the Hungarian heart and wallet. Many visitors therefore choose this location to meet and mix with locals, which is, after all, one of the main reasons why many people travel in the first place.
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Special Report
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Budapest Business Journal | March 18 – March 28, 2019
MNB Gearing up for More Hawkish Stance as Matolcsy Starts 2nd Term György Matolcsy, governor of the National Bank of Hungary (MNB), started his second six-year term early in March. Supplementing the government’s strategy, unorthodox policy is expected to remain in place, although now it will be deployed to tackle fears of rising inflation, slowing economic growth and to fuel Hungary’s competitiveness.
More Hawkish
Although most analysts do not yet expect the central bank to start monetary-policy tightening this year, according to a poll by Reuters, rate setters’ recent comments do indicate that the bank is eyeing inflation as it maneuvers towards a more hawkish stance. “Core inflation excluding indirect tax effects is likely to continue to rise in the coming quarters,” the central bank said in its latest post-rate setting decision statement in February. “The Monetary Council closely monitors incoming macroeconomic data and will decide to adjust monetary conditions depending on their outcome.” While the MNB has maintained its unconventional tool-set and kept the key policy rate at the all-time
low of
0.9%,
György Matolcsy (left) is sworn in for his second term as Governor of the National Bank of Hungary by Hungary’s President János Áder (right) on March 1 at the Sándor Palace. In the background, from right to left, are: Prime Minister Viktor Orbán; Mária Ádám Haszonicsné, Director General of the Presidential Office of the Republic of Hungary; János Latorcai, KDNP MP and Deputy Speaker of the Hungarian Parliament; and Márton Nagy, Deputy Governor of the MNB. Photo by MTI/Szilárd Koszticsák. a reversal in corporate lending trends supported by the MNB’s Funding for Growth Scheme. He also helped coordinate the conversion of retail foreign currency mortgages into forints, reducing household debt
by some
VERONIKA GULYÁS
The former Minister of Finance, once described by Prime Minister Viktor Orbán as his “right hand”, Matolcsy was appointed for a second (and final) term based on Orbán’s proposal. During his first term, the chief architect of the Hungarian government’s unorthodox economic-recovery program introduced a wide array of growth-supporting measures and the central bank base rate has been brought to a historic low, to 0.9% from 5.25%. Before taking his position for the first time, Matolcsy (who gives few interviews and declined our invitation to do so for this piece) pledged to use more creative monetary measures than his predecessors, following the footsteps of the U.S. Federal Reserve Board. The Fed and the European Central Bank pioneered the use of “quantitative easing” by buying government bonds in secondary markets. This unconventional monetary-policy tool is still used by central banks to inject money into the economy through buying financial assets from retail banks or other agents in the economy. Aiming to boost output without endangering financial stability or igniting inflation, Matolcsy oversaw
was the biggest problem facing Hungary’s economy. Nevertheless, Orbán got his way eventually and by the end of Simor’s term, the key rate had been cut to 5.25%, as the PM gradually replaced monetary council members with pro-government appointees as their mandates came to an end.
HUF 1 trillion
and thus weeding out one of the riskiest factors of the Hungarian economy. These steps cleared the space for cutting the key policy rate further, since the threat of a weakening currency was no longer a menace for household foreign currency loans. But amid the recent Europe-wide turn for a more hawkish tone at central banks, the Hungarian rate setters also started to talk of a more cautious approach in January.
Predecessor
András Simor, the former central bank head, now serves as senior vice president, chief financial officer and chief operating officer at the European Bank for Reconstruction and Development. During his term as central bank president between 2007 and 2013 he and his fellow monetary policy councilors kept the key policy rate relatively high, citing international economic turmoil and Hungary’s high exposure to it. The key rate stood at 7.75% when Simor took the helm. The MNB was forced to raise it to a
record-high of
11.5%
when the economic crisis hit the country in 2008. When Orbán returned to power
in 2010, the two men quickly locked horns over fiscal, monetary and economic policy, and the independence of the central bank. The Prime Minister expected Simor
Although his name is not included among the authors, the central bank’s latest plan to boost competitiveness can still be linked to Matolcsy. The 234-page Competitiveness Package includes a wide scale of recommended steps for the government to maintain economic growth and achieve 70-80% of the develop ment level of that of Austria by 2030. to quickly cut the interest rates, but the governor considered that reckless given the conditions at the time. Simor criticized the government for its reliance on windfall taxes that often targeted foreign-owned multinationals and other ad-hoc fiscal steps, saying “the uncertain, unpredictable regulatory environment”
inflation has been on the rise; the headline figure rose to 3.1% in February, although this is still in line with the central bank’s medium-term goal. In January, Deputy Governor Márton Nagy said if core inflation excluding the effect of indirect taxes, which is a favored indicator for long-term inflation, exceeded 3% in the first three months of the year, that would be a strong signal that tightening measures would be necessary.
Supporting Competitiveness
Although his name is not included among the authors, the central bank’s latest plan to boost competitiveness can still be linked to Matolcsy. The 234-page Competitiveness Package includes a wide scale of recommended steps for the government to maintain economic growth and
achieve
70-80%
of the development level of that of Austria by 2030. The 12 key areas, which are usually outside a central bank’s scope, include improving the productivity of Hungarian-owned small- and mediumsized enterprises, increasing their competitiveness in foreign markets, improving the productivity of the banking sector, digitalization of the administration, improving health, better access to knowledge and supporting for establishing families and boosting childbirth figures. The package, which includes 330 key points, notes the convergence of the Hungarian economy may only be successfully achieved if it maintains a growth surplus of 2 percentage points annually compared to more developed countries. Hungary’s gross domestic output grew by 4.9% on the year in 2018, but analysts have warned a global slowdown could affect Hungary’s outlook, too.
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Budapest Business Journal | March 18 – March 28, 2019
Banking ///briefs Matolcsy Sees Room for More Bank Mergers There is room for further consolidation in the Hungarian bank sector as the market can sustainably accommodate just five or six big players, National Bank of Hungary (MNB) Governor György Matolcsy was quoted as saying in an interview, reuters.com reported. Matolcsy did not comment on monetary policy outlook. “In an international comparison, the domestic bank system operates with fairly high costs and is expensive,” Matolcsy told the news website novekedes.hu. “One form of boosting efficiency is consolidation. Therefore, I see scope for certain domestic institutions to merge in the future,” he added. Major lenders in Hungary include the domestic OTP Bank, Belgian KBC’s local unit K&H, Austria’s Raiffeisen and Erste, as well as Italy’s UniCredit and Intesa SanPaolo unit CIB. In January, Prime Minister Viktor Orbán’s government launched the sale process of the state-owned Budapest Bank it bought from the financial arm of General Electric in 2015 for USD 700 million.
Fitch Upgrades Four Hungarian Banks on Sovereign Upgrade Fitch Ratings upgraded four Hungarian banks on March 4 as a result of an earlier upgrade of Hungary, business daily vg.hu reported. Fitch upgraded the Longterm Issuer Default Ratings (IDRs) of K&H Bank and Erste Bank Hungary to “BBB+” from “BBB”. It also upgraded the Long-term IDRs of the Hungarian Development Bank (MFB) and Magyar Eximbank to “BBB” from “BBB-”. The outlooks for the ratings are “stable”. The upgrades follow Fitches upgrade of Hungary’s own sovereign rating to “BBB” from “BBB-”, with a “stable” outlook, on February 22. Fitch noted that, both for K&H and Erste Bank Hungary, the Longterm IDRs remain capped at one notch above the Hungarian sovereign to reflect the country risks they face. The ratings of MFB and Magyar Eximbank are equalized with those of the Hungarian sovereign, reflecting Fitch’s view of the authorities’ high propensity to provide extraordinary support to both banks, if required, vg.hu noted.
Special Report | 19
S&P Upgrades Magyar Eximbank to ‘BBB’ S&P Global Ratings has raised its foreign and local currency issuer credit ratings on Magyar Export-Import Bank (Magyar Eximbank) to “BBB/A-2” from “BBB-/A-3”, napi.hu reported. The outlook on the rating is stable. S&P noted that it had upgraded Hungary to “BBB/A-2” on February 15. “The upgrade reflects the similar action we took on Hungary. We base our long-term rating on Magyar Eximbank on our opinion of its status as a government-related entity with an almost certain likelihood of receiving extraordinary support from the Hungarian government in the event of financial difficulties,” the rating agency was cited as saying by napi.hu.
Data Provision Deadline for Hungarian Bank Clients Approaches Clients of Hungarian banks who opened accounts before June 2017, when stricter rules to prevent money laundering and the financing of terrorism came into force, have until June 26 to comply with the new regulations and submit personal or corporate data, hvg.hu reported. A joint statement of the National Bank of Hungary, the Ministry of Finance and the Hungarian Banking Association said that under the rules that came into force in June 2017, banks are required to have copies of personal identification and proof of residence documents as well as
the personal information of their clients. Clients must also make a declaration if they are a politically exposed person. In the case of corporate clients, documents showing proof of business ownership must be resubmitted. Clients may comply by submitting the necessary documents in person at their banks or sending them by post. A number of banks are also allowing clients to comply using computers or mobile telephones with a camera and a microphone. The statement warned that clients who fail to comply with the rules will not be able to make account transactions after June 26, 2019, hvg.hu reported.
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20 | 3
Special Report
www.bbj.hu
Budapest Business Journal | March 18 – March 28, 2019
Commercial banks Rank
Ranked by total assets in 2017
Company Website
total assets in 2017 (HUF bln)
aFteR-tax pRoFit in 2017 (HUF mln)
eqUity (HUF mln)
no. oF bank bRanCHes in HUngaRy in 2017
pRivate banking
oWneRsHip (%) HUngaRian non-HUngaRian
top loCal exeCUtive CFo maRketing diReCtoR
addRess pHone email
1
otp bank nyRt.
7,772
251,550
100,537
362
✓
Individuals (4), Investors (20), others (12) Investors (64)
sándor Csányi – –
1051 Budapest, Nádor utca 16. (1) 473-5000 otpbank@otpbank.hu
2
k&H bank ZRt.
3,041
41,668
266,023
207
✓
– KBC Bank N.V. (100)
david moucheron – –
1051 Budapest, Vigadó tér 1. (1) 328-9000 bank@kh.hu
3
UniCRedit bank HUngaRy ZRt.
2,839
48,941
319,899
20
✓
– UniCredit S.p.A. (100)
mihály patai Liliana Beric József Sipos
1054 Budapest, Szabadság tér 5-6. (1) 301-1271 info@unicreditbank.hu
4
eRste bank HUngaRy ZRt.
2,179
80,974
360,591
145
✓
Corvinus Befektetési Zrt. (15) EBRD (15), Erste Group Bank AG (70)
Jelasity Radován Ivan Vondra –
1138 Budapest, Népfürdő utca 24–26. (40) 555-444 uszolg@erste.hu
5
RaiFFeisen bank ZRt.
2,172
28,545
202,852
73
✓
– Raiffeisen-RBHU Holding GmbH (100)
györgy Zolnai – –
1054 Budapest, Akadémia utca 6. (40) 484-848, (1) 484-8484 info@raiffeisen.hu
6
mkb bank ZRt.
2,063
30,827
161,315
69
✓
METIS Magántőkealap (45), Pannónia Nyugdíjpénztár (10), other (15) Blue Robin Investments S.C.A. (30)
Ádám balogh – –
1056 Budapest, Váci utca 38. (1) 327-8600 telebankar@mkb.hu
7
Cib bank ZRt.
1,678
22,414
206,193
70
✓
– Intesa Sanpaolo Holding International S.A. (100)
pál simák – –
1027 Budapest, Medve út 4–14. (1) 423-1000 cib@cib.hu
8
bUdapest bank ZRt.
1,026
13,895
134,987
95
✓
Corvinus Nemzetközi Befektetési Zrt. (100) –
koppány lélfai Katalin Deák Keresztyénné –
1138 Budapest, Váci út 193. (1) 450-6000 info@budapestbank.hu
József vida – –
1122 Budapest, Pethényi köz 10. (1) 202-3777 info@tbank.hu
www.otpbank.hu
www.khbank.hu
www.unicredit.hu
www.erste.hu
www.raiffeisen.hu
www.mkb.hu
www.cib.hu
www.budapestbank.hu
9
takaRékbank ZRt.
841
5,799
5,453
-
✓
Magyar Takarék Befektetési és Vagyongazdálkodási Zrt. (55), savings cooperatives (43), other (2) –
10
Citibank eURope plC. HUngaRian bRanCH oFFiCe
583
12,144
5,433
3
✓
– Citibank Europe Plc.0
kevin a. murray – –
1051 Budapest, Szabadság tér 7. (1) 374-5000 citibankmagyarorszag@citi.com
11
ing bank n.v. HUngaRian bRanCH oFFiCe
479
-490
44,965
1
–
– ING Bank N. V. (100)
tibor bodor Gyula Réthy –
1068 Budapest, Dózsa György út 84/B (1) 235-8700 communications.hu@ ingbank.com
12
takaRék keReskedelmi bank ZRt.
466
-9,955
3,059
51
✓
Takarék Jelzálogbank Nyrt. (100) –
levente szabó – –
1082 Budapest, Üllői út 48. (1) 452-9100 takarek@takarek.hu
www.takarekbank.hu
www.citibank.hu
www.ingwholesalebanking.hu
www.takarek.hu
3
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Rank
Budapest Business Journal | March 18 – March 28, 2019
Company Website
13
sbeRbank magyaRoRsZÁg ZRt. www.sberbank.hu
Special Report | 21
total assets in 2017 (HUF bln)
aFteR-tax pRoFit in 2017 (HUF mln)
eqUity (HUF mln)
no. oF bank bRanCHes in HUngaRy in 2017
pRivate banking
oWneRsHip (%) HUngaRian non-HUngaRian
top loCal exeCUtive CFo maRketing diReCtoR
addRess pHone email
355
498
5,135
26
✓
– Sberbank Europe AG (99), Türkise Halk Bankasi (1)
Richard szabó – –
1088 Budapest, Rákóczi út 7. (1) 328-6666 info@sberbank.hu
Éva Hegedűs – –
1095 Budapest, Lechner Ödön fasor 8. (1) 235-5900 info@granitbank.hu
14
gRÁnit bank ZRt.
307
648
13,654
2
✓
Pannónia Nyugdíjpénztár (9.90), E. P. M. Kft. (61.20), other (18), MKB Nyugdíjpénztár (10) –
15
CommeRZbank ZRt.
294
622
3,456
4
✓
– Commerzbank Auslandsbanken Holding AG (100)
klaus Windheuser – –
1054 Budapest, Széchenyi rakpart 8. (1) 374-8100 info.budapest@ commerzbank.com
16
bnp paRibas HUngaRian bRanCH oFFiCe
266
214,049
179
1
✓
– BNP Paribas S.A (100)
edit sziráki – –
1051 Budapest, Széchenyi István tér 7–8. (1) 374-6300 info.hu@bnpparibas.com
17
kdb bank eURópa ZRt.
212
1,435
19,613
4
✓
– Korea Development Bank (100)
yoon Jae keun – –
1054 Budapest, Bajcsy-Zsilinszky út 42–46. (40) 374-9900 info@kdbbank.eu
18
bank oF CHina (HUngÁRia) ZRt.
143
243
16,547
2
✓
– Bank of China Ltd. (100)
xu Haifeng – –
1051 Budapest, József nádor tér 7. (1) 429-92000 bocbp@pronet.hu
19
magnet bank ZRt.
133
1,989
11,528
12
–
legal entities (90), individuals (10) –
Zsolt Fáy, János salamon – –
1062 Budapest, Andrássy út 98. (1) 428-8844 info@magnetbank.hu
20
dUna takaRék bank ZRt.
78
331
4,749
21
–
Emese Balogh (19.90), Garancsi István (19.90), Illés Zoltán Pál (19.90), individuals (40.30) –
Zoltán illés – –
9022 Győr, Árpád út 93. (96) 550-720 kozpont@dunatakarek.hu
21
pannon takaRék bank ZRt.
73
121
4,856
42
–
Individuals and corporates (100) –
imre Hartmann – –
2900 Komárom, Igmándi út 45. (34) 540-760 –
22
sopRon bank bURgenland ZRt.
65
1,414
7,478
13
–
– „Communitas” Holding G.m.b.H. (100)
mag. andrea maller-Weiß – –
9400 Sopron, Kossuth Lajos utca 19. (99) 513-000 sopronbank@sopronbank.hu
23
moHÁCsi takaRék bank ZRt.
39
-96
3,486
15
–
Individuals (100) –
gábor pávkovics – –
7700 Mohács, Dózsa György utca 31. (69) 511-090 kozpont@mohacsitakarek.hu
24
polgÁRi bank ZRt.
38
87
2,413
17
–
Individuals (97.06), corporate (2.94) –
lászlóné béke – –
4090 Polgár, Hősök útja 8. (52) 573-035 titkarsag@polgaribank.hu
25
kiniZsi bank ZRt.
32
119
2,637
13
–
Individuals (100) –
antal lakatos – –
8200 Veszprém, Óváros tér 22. (88) 420-220 info@kinizsibank.hu
www.granitbank.hu
www.commerzbank.hu
www.bnpparibas.hu
www.kdb.hu
www.bankofchina.com/hu/
www.magnetbank.hu
www.dunatakarek.hu
www.pannontakarek.hu
www.sopronbank.hu
www.mohacsitakarek.hu
www.polgaribank.hu
www.kinizsibank.hu
Ÿ= would not disclose, NR = not ranked, NA = not applicable
This list was compiled from responses to questionnaires received by March 13, 2019 and publicly available data. To the best of the Budapest Business Journal’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, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu
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Budapest Business Journal | March 18 – March 28, 2019
Socialite Photo by David Gomez
Blues Godfather John Mayall Rolls Into Budapest On March 19, legendary British bluesman John Mayall makes a return visit to Budapest’s Akvárium Klub, an absolute treat for blues lovers or, indeed, anyone who loves hearing world-class musicians play live. DAVID HOLZER
The current tour celebrates Mayall’s 85 years on this planet, most of which have been spent playing and championing the blues. Born in the United Kingdom to a guitarist and jazz aficionado father, Mayall immersed himself in the blues from an early age and taught himself to play piano, guitar and harmonica. In 1963, after training as a graphic designer, he gave up the day job, moved to London and became a professional bluesman. The Bluesbreakers, the band Mayall founded, would go on to be phenomenally influential in the blues scene and, because of this, the wider
world of
1960s
and ’70s rock and roll. Legendary guitarists Eric Clapton, Mick Taylor – later to join the Rolling Stones – and Peter Green all played with Mayall. When Green left The Bluesbreakers, he took drummer Mick Fleetwood and bass player John McVie with him and formed Fleetwood Mac. In an elegant twist of fate, Mayall recorded his latest album, “Nobody Told Me”, on the same gear Fleetwood Mac used to record parts of their classic “Rumors”. Mayall’s genius for surrounding himself with great players hasn’t deserted him. But, thanks to his position as an elder statesman of the blues, he doesn’t have to seek out guitar gods. They come to him. “Nobody Told Me” features Joe Bonamassa, Todd Rundgren, Little Steven Van Zandt – best known for his work with Bruce Springsteen – and Alex Lifeson of Rush. Also playing up a storm is the frankly incredible Carolyn Wonderland, a blues player out of Texas who will be with Mayall when he plays in Budapest. When I caught up with Mayall for a chat via phone recently, he was at his home in California. Despite having lived there for
John Mayall what must be at least 50 years, Mayall’s northern English accent is as strong as ever.
Behind the Curtain
While researching this piece – basically, listening to lots of John Mayall albums on Spotify – I came across an album called “Behind the Iron Curtain”, recorded
live in
1985
in Szeged. I began by asking Mayall if he’d been back to Hungary. “We probably have,” he said. “We’re always on the move.” This kind of set the tone for the interview. Mayall was perfectly friendly but very to the point. [Editor’s note: Mayall has, indeed, returned to Hungary on at least three occasions.] I told Mayall I was listening to the new album and enjoying it. It’s a strong collection of impeccably played blues and Mayall is in great voice. I wondered if he had an agenda with regard to making albums. “It takes care of itself really,” he told me. “I like to document the progress we’re making year by year. It’s what I’ve always done.” I was surprised by the line-up of guitarists on the album, I said. “I was surprised too,” Mayall replied. “I wouldn’t have thought about them unless they volunteered their services. It was great for me to see the blues side of their playing. And they chose me. I didn’t choose them. Which is very flattering.” Was it unnerving playing with such great players? “We just get together and see if it works out. If it resonates, we’ll record it. When the music comes naturally, it only
ever takes two or three takes to get down. Usually the first take is the one we keep.” Did Mayall practice? “I never practice. The only time I ever play is when I’m with the band. When I finish a tour, I go home and never touch an instrument. That’s the way it’s always been.”
A Life in Blues
The title track of the album, “Nobody Told Me”, is a slow blues number on which Wonderland plays lovely guitar. Its opening line is “Nobody told me that a life
would introduce my music to a whole lot more people. It never did happen, but I’ve always had a faithful following. Enough to keep me in business.” What about the blues itself, was Mayall surprised it was still so popular? “I’m just very glad that it is. Nobody would have forecast that this would have been the case back in the 1930s and ’40s but it’s become part of our heritage. I would never have guessed that I could make a career out of the blues because there was no interest at that time. That’s the reason I didn’t start playing professionally until I
was
“We just get together and see if it works out. If it resonates, we’ll record it. When the music comes naturally, it only ever takes two or three takes to get down. Usually the first take is the one we keep.” could move so fast.” I was curious to know whether Mayall had ever subscribed to the Mick Jagger school of thought that says: I won’t be doing this when I’m 40, 50, 60 etc. “I don’t think that far ahead,” he said. “You just enjoy what you’re doing, and hope people will like it. You can never tell what’s going to happen next, but one thing leads to another. A long time ago, I thought that it would be great to have a hit record that
30.
But I’ve always played what I feel, and it’s worked out very well for me.” The press release I received from Mayall’s management described him as “a seemingly ageless road dog, who famously takes no days off and carries his own gear on tour”. “If I didn’t enjoy touring, I wouldn’t do it,” Mayall told me. “I have to express myself and I enjoy sharing that with the people. It’s a different set list every night. We don’t rehearse.” Was that ever unnerving? “Not at all. I like playing with people, one player sparking off another. That’s where the excitement comes in.” Looks like we’re in for a good night on March 19.
Find out more at www.akvariumklub.hu
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Budapest Business Journal | March 18 – March 28, 2019
The Superior Side of Eger Evolves Hungary’s northeastern wine region of Eger is one of those areas that in the past has so often flattered to deceive, but it is fast getting its act together with fine wines becoming the norm and not the exception. In fact, some of the wine is getting very good indeed. ROBERT SMYTH
Nagy-Eged hegy, home to Hungary’s highest vineyard, rises dramatically above the baroque beauty that is the town of Eger. This imposing hill, composed of pure limestone, is surrounded otherwise by a layer of volcanic tuff under brown forest topsoil, and the wines from the hill are both prized and consequently priced highly. One relative bargain from Nagy-Eged dűlő is the distinctively made Egri Bikavér Grand Superior Nagy-Eged 2015 from the Thummerer Winery. Nagy-Eged dűlő
and fermented together, as opposed to the more usual practice of vinifying separately and blending after the wines are aged individually in oak barrels. The grapes apparently ripened at more or less the same time and the idea is that a little under ripeness here can be compensated for a tad of over ripeness there. In this case, the method works brilliantly in capturing the character of the vineyard without putting the emphasis on the individual grapes. It has really appealing aromas of potpourri and very vibrant red and black fruit that continue on the lively, juicy and long palate with its nicely restrained tannins and zesty acidity. It was aged in third-fill Hungarian oak barrels for
“I’m not thinking of a huge change; I grew up with my months father and I have similar views and the oak use is spot on with a touch of chocolate-vanilla richness rounding the on winemaking. I will try to wine off smoothly. emphasize what is special Perfectly Balanced about individual vintages. This medium plus bodied wine is perfectly Without tradition, there is no balanced and the alcohol hits the scales at life; I believe in blends that are a very welcome 13.5% – on the low side for such a concentrated wine made from very traditional. I wanted to make low yields. The yield for Grand Superior must not exceed 60 hectoliters/hectare, a Bikavér as my first red.”
27
is a south-facing vineyard lying on the middle of Nagy-Eged Hill where there is some topsoil that holds much needed water reserves, according to Thummerer winemaker József Lamport. This wine is a field blend of Cabernet Franc, Kadarka, Kékfrankos, Merlot and Syrah (all planted in 2008), which means that the grapes of these different grape varieties were picked at the same time
György Lőrincz Jr. with his first red wine, a Bikavér. itself, carved out of volcanic tuff, is a delight to visit. This is an impressive winery that often flies under the radar, and concentrates more on making wine than on marketing. St. Andrea has long turned out some of Eger’s most elegant wines under the expert hand of György Lőrincz. Lőrincz, who in his
early
50s
still cuts a relatively youthful figure replete with a fine beard that many a hipster would be proud of, is handing over increasing responsibility to his son György Lőrincz Jr. The younger Gyuri has already made his own white wines under the St Andrea name, and his first red-effort (Axios, a Bikavér) is soon to hit the shelves. In tandem, the winery is launching the Ifj. Lőrincz György – Private Selection, which comprises Egyetlen (a dry white blend), Axios and Ajándék (a very well-crafted botrytized sweet wine).
and the hills yields much lower than that. Lamport, who works closely in tandem with winery founder Vilmos Thummerer, says that the acidity from the limestone is less of that sour malic acidity and more of the milder tartaric acid, which helps to retain the vibrant fruitiness in the final wine. This vintage, which has already claimed a Silver medal at Vinalies Internationales 2018, held in Paris, and a Gold medal at Traditional Blends the Eger Wine Region Wine Competition “I’m not thinking of a huge change; I grew 2018, is a bargain at HUF 4,990 from Thummerer’s webshop. The cavernous cellar up with my father and I have similar views
Socialite | 23
on winemaking. I will try to emphasize what is special about individual vintages,” said Lőrincz the younger. “Without tradition, there is no life; I believe in blends that are traditional. I wanted to make a Bikavér as my first red.” Axios will cost HUF 14,500 from the winery from April 1, and it will also be available from St. Andrea’s eponymously named Budapest restaurant. Lőrincz Jr. says he found making the red more of a challenge than white, having gained experience abroad working in white wine regions in Austria and New Zealand, as well as in Tokaj (for the legendary István Szepsy; it is no surprise that the sweet Ajándék is so accomplished). However, the proof is in the pudding and the Axios Egri Bikavér Grand Superior 2016, a blend of Kékfrankos, Merlot, Pinot Noir, Cabernet Franc and Syrah, harvested between September 16 and October 13, is a fine opening effort. For Lőrincz Jr., Kékfrankos is the most important grape and gives the backbone, and Nagy-Eged is the top vineyard for Bikavér. “Nagy-Eged stands out, it cannot be compared,” he says. Axios has intense, silky aromas of sour cherry and dark chocolate, while it is concentrated with lively fruitiness, complemented by complex herbal notes on the long palate. It carries its high alcohol content of
15.3% well,
without there being much in the way of burn. It was aged for 17 months in oak barrels. The grapes for this wine come from Nagy-Eged-hegy (higher up than NagyEged dűlő) where the topsoil fades away and gives way to total limestone), from Nagy-Eged dűlő itself, and the Hangács vineyard; the latter has nothing to do with limestone, yet it is the source of one of the most consistent and expressive Bikavérs of all, which has a strong sense of place. Incidentally, the 2016 version of St. Andrea’s Hangács Bikavér Superior (HUF 5,800 from Bortársaság), which comes from Demjén is already in fine fettle, and has an attractive spicy and peppery quality to go with the plentiful fruit. Meanwhile, the winery’s Merengő Grand Superior 2016 (not a single vineyard wine) is taking shape. This Grand Superior always needs time in the bottle to settle down and reveal its undoubtedly beautiful face (especially since Kékfrankos became the core grape) and the 2016 is no exception but all the components are there (HUF 7,950 from Bortársaság).
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