* Wants to become No.2 lender in Hungary after OTP
* Would look at available targets if fit strategy
* Would need to adapt Austria structure under "Basel 3"
By Boris Groendahl
VIENNA, Jan 20 (Reuters) - Erste Group Bank <ERST.VI> would
like to become the second biggest lender in Hungary and would
look to buy assets that fit its structure, Chief Executive
Andreas Treichl said on Wednesday.
Treichl said he still saw Hungary, the first eastern
European country that was bailed out by the International
Monetary Fund in 2008, as an attractive market.
"In Hungary, we would like to have a stronger position --
despite all difficulties," Treichl told Reuters on the fringes
of a Euromoney conference. "We don't want to surpass OTP but
we'd like to be the second-biggest retail bank after OTP."
Erste, the No. 3 lender in central and eastern Europe,
currently ranks fourth in Hungary on an almost equal level with
Raiffeisen International <RIBH.VI> and BayernLB's []
MKB. Domestic OTP <OTPB.BU> is the market leader.
Like all other emerging European banks, Erste suffered from
a massive rise in bad debt this year and raised cash from
Austria's bank aid package as well as on the market to bolster
capital. But it remained profitable in all quarters but one.
"If there was something attractive coming on the market (in
Hungary), we would have a look at it," Treichl said.
MKB, which BayernLB is expected to sell to win European
Union approval for German state aid, would not be attractive
because of its wholesale-financed business model, Treichl said.
"Any acquisition would have to fit our principles, banks
that are wholesale financed don't bring us much," Treichl said.
"What we would buy are deposits, widely spread deposits."
In Slovakia, Romania and the Czech Republic, where Erste is
already the biggest bank, as well as in Austria, Erste is
"saturated", Treichl said.
Treichl said Erste was currently winning market share in
Hungary and Romania because it was giving new loans while many
of the banks that outgrew Erste in the past had stopped lending.
"The crisis has brought quite a bit of self-regulation --
the most aggressive market participants are gone," he said.
"There are many banks in Hungary and Romania that don't lend
anymore."
"We are not a really big bank in Hungary but we have an
enormous share of the new lending," he said. In Romania, where
Erste had lost market share because of stricter rules for fx
loans, it was now winning back business, he said.
BASEL 3 ADAPTIONS
Erste is among the European banks most affected by a
controversial new rule proposed by the Basel Committee on
Banking Supervision, under which capital held by minority
shareholders would not count towards regulatory limits.
This is due to a unique structure under which Erste and the
Austrian savings banks guarantee each others' deposits and which
allows Erste to consolidate those savings banks without formally
owning them.
Analysts estimate the new rule would reduce Erste's core
Tier 1 capital -- the key regulatory measure -- by around a
third.
Treichl said if those rules came into effect unchanged, he
would change the terms of the deposit guarantee scheme in a way
that would also reduce the assets used for the calculation of
the core Tier 1 ratio to offset this effect.
"We can work this out," Treichl said. "We would need a
different legal structure for the guarantee scheme but there are
ways to implement that."
(Editing by David Cowell)
