Hungary: Propping up Postabank
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Hungary: Propping up Postabank

State bail-outs for indebted, inefficient and over-politicized banks were supposed to be a thing of the past in Hungary. Not so. As its rivals rake in profits - transforming Budapest into the financial hub of eastern Europe - the country's second-largest financial institution, Postabank, has limped back to the warm milk of public funds for yet another capital increase as the government makes yet another push to find a buyer for the troubled bank.

But even with a Ft24 billion ($114 million) injection last month, following a Ft7 billion capital increase in June, will any buyer step forward if the current management remains? "That's the question," says Larry Pelleccio, a senior vice-president for Moody's Investors Service based in Cyprus. "How much control can a strategic investor get and how much will management resist?"

Robert Muranyi, deputy chief executive of Postabank, likes to stress that his "is not a classical commercial bank with a classical approach [to business] or a classical management".

Indeed - the rest of Hungary's top banks have spent the past three to four years charging furiously forward, strengthening balance sheets, modernizing operations, expanding branch networks and broadening corporate and retail services.

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