Report 3Special r
BBJ
rance Retail banking/insu
SPECIAL REPORT: VOL. 22. NUMBER 21
d yea Banking on a goo private As assets grow, e bankers and alternativ are service providers to looking forward year. another strong GABRIELLA LOVAS
is banking sector Ample Hungary’s private strong year again. central gearing up for a by global level of liquidity supported with the low banks combined Hungary encouraged in than interest rates real portfolios ratherJános clients to build in bank deposits, told keep their funds of Private Bankingmore Dócs, CIB Head Journal. The the Budapest Business meant a lot of active money management private banks. at a latest banking fees for Portfolio.hu’s decisions for them private banking. rose us to make the he added. According to assets OTP leads in client Survey, risk level,” significantly weakened, Private Banking in the first are, in turn, and Geneva, have lured away by local or certain HUF 3 trillion be Independent providersis a Hungarian share of 6.9% to almost Erste their clients can had the biggest providers. Currently, from more flexible. Equilor present on the half of 2014. OTP market with HUF 931 other regional been net inflow of assetsof our provider that has the private banking management followed said Nagy. “In sees a massive for 25 years, offer the services to worry biggest billion assets under abroad. “We can for those, who do not market MKB Bank. The we do not haveprovisions, by Raiffeisen and Vienna practice Hungary,” addition, in terms of clients’ or making their assets to about bad loans alternative provider Securities. out loans. Thus, want to return do not give are are held assets was Concorde were as we said Kállay. trends from 2013 assets, which HUF 19 bln This year, the Kállay, are in safer Funds totaling Savings customers’ said András the Stability securities accounts,providers are Bank getting stronger, deposited on sked bank on Banking at Erste both Alternative no−questions−a of Head of Private Fund (BEVA) Accounts, the out of off− hands.” Customer assets money Protection Zrt. lure to arms Hungary in Investor at Equilor are accounts meant private banking Private bankers market and that were introduced commercial banks’providers have grown, the market members. shore accounts 2014. At first, the assets, continuously monitoring opportunities an increase in The gap and independent the first half of is considering gaining ground. is trend, CIB market required to open saw the inflow of big offshoredropped discussing investment with the latter as soon as the banking providers minimum amount The average average amount with their clients sure that between private As there is not enough the banking account. at around however, the said Kállay. The provides one. The staff makes potential further widening. the market, weaker a private in Hungary is in the third quarter, aware of the deposited is in up entry level clients are fully amount to be new money no chance of catching for HUF 70 million. already minimum risks and rewards. providers have 5 mln. in the market is “We have to fight Consolidation BayernLB HUF Kállay. with the top players. client,” stressed assets gathering pace. Germany’s state A NEW CONCEPT each and every the Hungarian introduction transfer of CHOOSING PROVIDERS MKB Bank to welcomed the to banks’ private The currently observed to others is being sold of customer assets, are pros and cons the services of The market of trust into Hungarian in July. In termsthird among Hungary’s There of the concept services and from certain providers the new Civil no is banking it Under ranked yields. Thus, at the MKB was in March 2014. driven by higher banking providers alternative providers. private banking law of low interest rates, a means of transferring most to top private 2014. As Citi is pulling period. Code, a trust is In an environment surprise that of June increasingly difficult accounts at more ownership of assets for a limited waiting common end it is getting still banking in Hungary, clients typically keep yields that were taking out of consumer participants, whilehave started Market considering provider. Bertalan obtain the 6−8% are one years, is than providers or three detailed rules, banking operations, The asked if Erste in the past two at Equilor many Unable to offer direct debit and for the own structures. Private Banking there is over its clients. Whenthe bank is open to includes preparing their Nagy, Head of accounts, Kállay said said. “However, providers can target group for such services gained cards, who Investment Zrt. The bank has in order to interested, deposits, alternative one area, business owners, the market, so private banking compete with banks in only have every opportunity. top managers and no free lunch in assets from yields, clients said Kállay. Private aim to separate their private experience in integrating the clients of generate substantial he added. Nagy believes business namely investments, after taking over risks,” their businesses. in Hungary in 2012, banking clients are mostly to accept higher can be based on the clients their those of take about 10−20 years to use BNP Paribas’ branch like to keep all it will Future growth owners and might at one provider. “At that as a form of managing a family’s portfolios, although that of ING in 2006. increase of the the current low−yield and banking activities have to show strong trusts as seen in other countries. in Other wealth, REVERSED time, banks this is limited on an agreement according to Dócs. assets CAPITAL OUTFLOW offshore private the same in the basic competences, A trust is based and the environment, portfolio a regrouping of the original owner The value of Hungarian HUF 2 tln performance we launched options include abroad and an deposits is estimated to reach ago,” he betweenand the trustee for the efficient this is why years two outflow deposited capital previously management services have time settlor bank’s share within following a significant the assets. the or three years. stressed. “Most clients do not they want management of increase of a private the past two also mentioned European finances and natural during the total. Dócs after traditional as Zürich to manage their customers as a bank’s premium generation of private However, centers, such banking base of the new Following the current private banking clients.
The pace of the consolidation in g market is beginnin to pick up.
RETAIL BANKS, INSURANCE NOVEMBER 14, 2014 – NOVEMBER 27, 2014
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NEWS
Photo: MTI / Attila Kovács
Economy Minister Mihály Varga looks on as Parliamentary Speaker László Kövér weighs a pen drive containing a digital version of the budget proposal. Analysts say the plan may be banking on more VAT than the government will actually receive. 3
SPECIAL REPORT
BUSINESS
Demonstrators call for tax chief to resign
Retail bankers expect another good year
Keeping in the competition
In the third Facebook-organized demo opposing government action in a month, protesters sought the resignation of the head of the tax authority after she admitted being branded “corrupt” by the U.S. 05
With assets increasing and low interest rates keeping portfolio management active, retail bankers and alternative providers predict a continuation of the good business they’ve been seeing. 13
At a BBJ-sponsored conference and seminar on staying competitive, there was a focus on the importance of IT as a vital local product that Hungary is in a good position to export. 10
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Budapest Business Journal | November 14 – November 27, 2014
SUBSCRIPTIONS
Report
BBJ
3Special Retail banking/insurance
SPECIAL REPORT:
Banking on a good
year
private As assets grow, bankers and alternative are service providers to looking forward year. another strong GABRIELLA LOVAS
is banking sector Ample Hungary’s private strong year again. central gearing up for a by global level of liquidity supported with the low banks combined Hungary encouraged in than interest rates real portfolios ratherJános clients to build in bank deposits, told keep their funds of Private Bankingmore Dócs, CIB Head Journal. The the Budapest Business meant a lot of active money management private banks. at a latest banking fees for Portfolio.hu’s decisions for them private banking. rose us to make the he added. According to OTP leads in Survey, client assets first risk level,” significantly weakened, Private Banking in the are, in turn, and Geneva, have lured away by local or certain HUF 3 trillion be Independent providersis a Hungarian share of 6.9% to almost Erste their clients can had the biggest providers. Currently, from more flexible. Equilor present on the half of 2014. OTP market with HUF 931 other regional been net inflow of assetsof our provider that has the private banking management followed said Nagy. “In sees a massive for 25 years, offer the services to worry biggest billion assets under abroad. “We can for those, who do not market MKB Bank. The we do not haveprovisions, by Raiffeisen and Vienna practice Hungary,” addition, in terms of clients’ or making their assets to about bad loans alternative provider Securities. out loans. Thus, want to return do not give are are held assets was Concorde were as we said Kállay. trends from 2013 assets, which HUF 19 bln in safer Kállay, This year, the Funds totaling Savings customers’ said András accounts, are the Stability Bank getting stronger, providers are bank on securities deposited on Banking at Erste both no−questions−askedof off− hands.” Alternative Fund (BEVA) of Head of Private Accounts, the Customer assets Protection to lure money out arms Hungary Zrt. in Investor at Equilor are accounts meant private banking Private bankers market and that were introduced commercial banks’providers have grown, shore accounts the market members. monitoring the 2014. At first, an increase in The gap and independent opportunities assets, continuously the first half of is considering gaining ground. is trend, CIB market required to open saw the inflow of big offshoredropped discussing investment with the latter as soon as the banking providers minimum amount The average average amount with their clients sure that between private As there is not enough the banking account.is at around however, the said Kállay. The provides one. The staff makes potential further widening. the market, weaker a private in Hungary in the third quarter, aware of the deposited is in up entry level clients are fully amount to be new money no chance of catching for HUF 70 million. already minimum risks and rewards. providers have 5 mln. in the market is “We have to fight Consolidation BayernLB HUF Kállay. with the top players. client,” stressed assets gathering pace. Germany’s state A NEW CONCEPT each and every the Hungarian introduction transfer of CHOOSING PROVIDERS MKB Bank to welcomed the to banks’ private The currently observed to others is being sold of customer assets, are pros and cons the services of The market of trust into Hungarian in July. In termsthird among Hungary’s There Civil of the concept services and from certain providers Under the new ranked yields. Thus, it is no at the banking in March 2014. rates, MKB was driven by higher of transferring banking providers alternative providers. private banking law of low interest a trust is a means limited period. most to top private 2014. As Citi is pulling In an environment at more Code, for a surprise that of June increasingly difficult keep accounts in Hungary, ownership of assets while still waiting common end it is getting clients typically yields that were of consumer banking Market participants, considering taking Bertalan out obtain the 6−8% have started is than one provider. providers are or three years, detailed rules, banking operations, The asked if Erste in the past two at Equilor many Unable to offer direct debit and for the own structures. Private Banking there is over its clients. Whenthe bank is open to includes preparing their Nagy, Head of accounts, Kállay said said. “However, providers can target group for such services gained cards, who Investment Zrt. The bank has in order to interested, deposits, alternative one area, business owners, the market, so private banking compete with banks in only have every opportunity. top managers and no free lunch in assets from yields, clients said Kállay. Private aim to separate their private experience in integrating the clients of generate substantial he added. Nagy believes business namely investments, after taking over risks,” their businesses. in Hungary in 2012, banking clients are mostly to accept higher can be based on the clients their those of take about 10−20 years to use BNP Paribas’ branch like to keep all it will Future growth owners and might at one provider. “At that as a form of managing a family’s portfolios, although that of ING in 2006. increase of the the current low−yield and banking activities have to show strong trusts as seen in other countries. in Other wealth, REVERSED time, banks this is limited on an agreement according to Dócs. assets CAPITAL OUTFLOW offshore private the same in the basic competences, A trust is based and the environment, of portfolio a regrouping the original owner The value of Hungarian HUF 2 tln performance we launched options include abroad and an deposits is estimated to reach ago,” he betweenand the trustee for the efficient this is why capital outflow management services two years previously deposited have time settlor bank’s share within following a significant the assets. the or three years. stressed. “Most clients do not they want management of increase of a private the past two also mentioned European finances and natural during the total. Dócs after traditional as Zürich to manage their customers as a such bank’s premium generation of private However, banking centers, base of the new Following the current private banking clients.
The pace of the consolidation in market is beginning to pick up.
RETAIL BANKS, INSURANCE
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Photo: MTI / Attila Kovács
Economy Minister Mihály Varga looks on as Parliamentary Speaker László Kövér weighs a pen drive containing a digital version of the budget proposal. Analysts say the plan may be banking on more VAT than the government will actually receive. 3
SPECIAL REPORT
NEWS
BUSINESS
Demonstrators call for tax chief to resign
Retail bankers expect another good year
Keeping in the competition
In the third Facebook-organized demo opposing government action in a month, protesters sought the resignation of the head of the tax authority after she admitted being branded “corrupt” by the U.S. 05
With assets increasing and low interest rates keeping portfolio management active, retail bankers and alternative providers predict a continuation of the good business they’ve been seeing. 13
At a BBJ-sponsored conference and seminar on staying competitive, there was a focus on the importance of IT as a vital local product that Hungary is in a good position to export. 10
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Communism is dead, but its spirit lives As the world marked the 25th anniversary of the fall of the Berlin Wall, it was hard to sit here in Hungary and celebrate the end of Soviet−style communism. Looking at the actions of the Fidesz Government, it feels more like we are caught in a retro nightmare, and the whole system, or something like it, is starting up again. The parallels to old−style communism are everywhere: the effort to control the media, which began as soon • as Fidesz took power in 2010; the reduction of seats in Parliament and redrawing • of voting districts in an attempt to ensure one−party rule; the special taxes on banks, telecoms, the media • – businesses making what government officials bizarrely describe as an “unfair” profit; • the nationalization of industries; the love affair with Moscow and criticism of Western • Europe and America; the questioning of capitalism without proposing any • reasonable alternative. Along with all these maneuvers, there is also an apparent effort to create a new proletariat, a hard−working, underpaid underclass of people who must learn to enjoy Hungary, because they cannot afford to leave it. The government has announced its intention to eliminate unemployment in a few years, and they are already bragging about bringing the number down below 8%. But they are counting “fostered workers” as employed. Fostered workers are people who cannot find jobs, so the state gives them
menial labor for wages averaging a barely livable HUF 78,000 a month. In a similar vein, the government has tried to outlaw homelessness – who needs shelters when you have jail cells and work camps? Fortunately, a court has, at least temporarily, rejected that law. But it is not just the treatment of the jobless that is a problem. Even the majority of the employed are poorly paid. The average salary in Hungary is HUF 234,600 before taxes, and this country generally has some of the lowest wages in the European Union. As long as the forint is low, and relative wages are low, Hungary can continue to be a good place to locate a factory, which is why the country has so many manufacturers here. This setup is good for exports and production numbers, but not so great for workers. The setup is also apparently good for the government, which seems to have made it a conscious policy to keep the forint at a low value. And the new education policy, which mandates vocational training after grade school, seems designed to continue the guaranteed supply of cheap factory workers. Meanwhile the government seeks to make up for the low incomes by making natural gas and nuclear deals with Russia. The stated purpose of these deals is to keep utility bills low, which is supposedly all the average citizen has to worry about. There are bright and capable people in this country, and a lot of them leave, because opportunities are so much better elsewhere. The less fortunate are forced to stay in Hungary, financial captives in a country that increasingly seems caught in a retro version of the bad old, pre−1989 days.
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Above, crowds in Vörösmarty tér in Budapest in 1988 protest against plans to build a section of a hydroelectric dam near the Danube bend in 1988, in one of the first demonstrations against the government since 1956. At left, demonstrators at the square around the corner, József Nádor tér, on November 9, in the third demonstration against the government in about a month. See “Yet another anti−government demo”, page five.
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NEWS
Tax chief spurs new demo 05 NEWS
CPI still low
04
macroscope
Analysts: Budget optimistic on VAT European Commission put Hungary’s GDP growth at 2.5% next year and its state debt at 76.4% of GDP. According to OTP analysts, the most important development is that the commission sees the debt trajectory descending.
A closer look at the numbers in Hungary’s 2015 draft budget reveals the risk of a shortfall, analysts say.
COUNCIL URGES DEBT REDUCTION PROGRAM Although it did not have any fundamental objections, the Fiscal Council identified some risks related to the deficit target and the public debt rule in its report. The growth
Cutting deficit: Economy Minister Mihály Varga plans a 2.4% budget shortfall.
target could be in danger if there is a serious deterioration in the external environment or the inflow of EU funds is not as planned. External risks include the impact of the sanctions related to the conflict between Ukraine and Russia, the slowdown in the global economy, and the fragile recovery in the EU. The planned significant increase in consumption−related taxes is also deemed uncertain, partly due to the extent of the black economy. Local government indebtedness would rise by HUF 160 bln, while the balance will be only HUF 15 bln, which is contradictory, according to the statement. The council asked the government to quantify the risks and decide whether the planned reserves are big enough to manage
risks related to the 2.4% deficit target and the 0.9 percentage point reduction in public debt. The council said that the planned reduction in state debt could be met even if GDP growth is slightly slower. However, it urged the preparation of a mid−term debt reduction program until 2022 in order to meet the new EU requirements. The council consists of three members: chairman Dr. Árpád Kovács, the president of the State Audit Office László Domonkos, and Central Bank governor Dr. György Matolcsy. In its fall forecast published on November 4, the European Commission projected that Hungary’s central budget deficit would remain under the 3% threshold in the coming years. The
PROJECTED TAX REVENUES FOR 2015 Payments by corporation Corporate tax revenues: HUF 341.4 bln Bank levy: HUF 144.2 bln Simplified entrepreneurial tax (EVA): HUF 83.8 bln “Robin Hood” tax on energy suppliers: HUF 44.7 bln KIVA: 56.3 bln KATA: 16.4 bln Revenue from a new ad tax: HUF 6 bln Consumption taxes VAT revenue: HUF 3.17 tln Excise duties: HUF 913.5 bln Telecom tax: HUF 69.2 bln (including internet tax) Financial transaction tax: HUF 262.2 bln Personal income tax: HUF 1.6 tln
Source: 2015 draft budget
The debate on the 2015 draft budget will begin on the week starting November 17. The bill, submitted by Economy Minister Mihály Varga on October 30, will go before committees on November 26−27. The final vote is expected on December 15. The budget bill targets a deficit of 2.4%, calculated in line with EU methodology, which is lower than this year’s 2.9% target. Central government revenue would reach HUF 16.380 trillion and expenditure HUF 17.258 tln, resulting in a deficit of HUF 877.6 billion. The government forecasts a 0.9−percentage−point reduction in public debt to 75.4% of GDP, GDP growth of 2.5%, and a 2.6% rise in household consumption. The draft budget assumes a 1.3% increase in employment, 1.8% average annual inflation and an external financing capacity of 8.4% of GDP. The government expects a 5.2% increase in VAT revenues to more than HUF 3 tln driven by household consumption. Within that increase, both volumes and the inflation component would grow. In addition, the bill counts on the whitening of the economy, thanks to various government measures such as the implementation of online cash registers. Sectoral taxes would remain in place in 2015. The very much−opposed internet tax will be removed from the bill, but, as Nomura analyst Peter Attard Montalto notes, “from a macro and fiscal perspective the proposed revenue target of €65 million or some 0.07% of GDP is largely insignificant”. From this perspective, he finds the ad tax and the greater state control over the telecom industry more interesting. The government is reportedly considering cancelling the ad tax, as it is not likely to contribute as much to the state budget as expected.
Photo: MTI / Zoltán Máthé
GABRIELLA LOVAS
RISKS POINT TO HIGHER SHORTFALL The 2.5% growth target is “higher than our 2% projection, but the same as the IMF’s forecast and analysts’ consensus”, said OTP Bank analyst Szilárd Kondora in a flash note on the budget. He believes that the deficit target is attainable, but risks point to a higher shortfall. There is planned one−off revenue of HUF 169 bln with an unknown title, which, according to Kondora, may be the income from mobile frequency sale. He claims that if this revenue item is accomplished, then the budget will be as planned and the deficit target may be achieved. He, too, finds the level of VAT revenues too high, as “the ministry’s calculations as to tackling the shadow economy by implementing the Electronic Road Freight Control System are too ambitious”. He questions the objective of the HUF 50 bln capital increase at the Hungarian Electricity Works (MVM), as “if MVM receives money to finance its loss, it could impair the budget balance”. He also mentions the increase in local government indebtedness, which needs to be clarified as it implies a risk pointing toward larger deficit. SUSTAINABLE MACRO PATH The bill presumes a slight optimism, but the projected macroeconomic course is sustainable, according to K&H analyst Dávid Németh. Compared to this year’s targets, the bill calculates with a 2.4% rise in revenues and a 1.7% increase in expenditures, which roughly equals expected inflation. Corporations’ payments, including corporate income taxes, are somewhat lower. In the case of consumption taxes, the government foresees a nominal 3.4% increase, while personal income tax revenues are set to increase by 5.4%. On the expenditure side, interest expenses will drop by 4.5% from this year’s targets. The health sector will receive 4.2% of GDP compared to this year’s 4.1%, which equals several tens of billions of forints, with hospitals receiving the extra funds, said Németh. Education will get an extra HUF 13 bln, which is only a marginal increase. Within that, secondary education will get a bit more, higher education a bit less, than in 2014. Németh stressed that the comparison with this year could change depending on the final numbers.
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Budapest Business Journal | November 14 – November 27, 2014
NEWS
Consumer Price Index in 2014
IN BRIEF MOODY’S UPGRADES HUNGARY’S RATING TO STABLE Moody’s rating service upgraded Hungary’s government bond rating from negative to stable, giving the country’s outlook a score of Ba1. The Hungarian economy seems to be stabilizing, the government has shown a commitment to maintain the budget deficit below 3% of GDP and there is improved flexibility towards external shocks, according to Moody’s. Moody’s analysts said they expect the country’s real GDP growth to be around 3% in 2014 before slowing down to 2.4% in 2015. For the following years, the agency expects growth to be fi xed at around 2.2%, which is still low compared to the peers in the region. The agency expects overall debt−to−GDP ratio to remain around 77% of GDP for both 2014 and 2015. Moody’s analysts said the debt ratio will probably stay vulnerable to exchange fluctuations, but it expects a gradual diminishing of the debt ratio’s exposure to adverse foreign− currency movements as a result of the government’s efforts at redirecting borrowing to the domestic market as part of the earlier announced self−financing plan. According to Moody’s, the external debt as a proportion of GDP fell, chiefly due to the de−leveraging of corporate, banking and household sector. In line with the estimates of the Moody’s, the external debt ratio of GDP would stand at 128% by the end of 2014, which would be lower by 58 percentage points compared to the peak in 2009. MVM: WE’RE READY TO STEP IN TO REPLACE MULTINATIONALS A representative for state−owned Hungarian electricity and energy group MVM told MTI it was ready to take over the role of multinational companies withdrawing from the region. MTI asked the company to respond to information carried by Hungarian news portal 444.hu that Hungary was in talks about the purchase of the Slovak Electricity Works. The Italian owner wants to sell 66% of the company and the Hungarian buyer could be state−owned MVM or minority state− owned oil and gas company MOL, the news portal reported. Companies in the energy sector are watching anxiously as the state prepares to move deeper into the utilities business. An MVM representative said the company is seeking ways to expand in a mutually beneficial way in the field of energy in the region. It noted that it has become the biggest Hungarian−owned company in Hungary, the fourth biggest Hungarian company and the 25th biggest group in Central Europe. MVM’s spokesperson said the company is ready to take over the role of multinationals leaving the region, especially when there are synergies to make an efficient use of its assets in addition to improve the energy safety of the region. The group has the task of realizing energy policy goals in line with the energy strategy, to preserve the stability of the energy systems and to maintain capacities. The most important goal
is safety of supply and the diversification of procurement and supply routes and the rational and economic operation of the assets, the company representative said. CAR MANUFACTURING ROARS BACK IN SEPTEMBER AFTER SLOW AUGUST The increase of output at Hungary’s vehicle manufacturing companies — widely considered to be the engine of growth in Hungary’s industrial sector — picked up in September after slowing in August due to ed shutdowns, a second reading of data released by the Central Statistics Office (KSH) reported on November 12. The automotive sector saw an output increase of 15.3% y.o.y. in September, as compared to the 4% reported for August, when German carmakers Audi and Opel had shutdowns — the former for three weeks — and Magyar Suzuki reduced the number of shifts. Output of the computer, electronics and optical equipment segments, accounted for another large chunk of the industrial sector, and they rose by 6.8%, while the output of food companies climbed by 5.8%. Total industrial output rose 7.6% y.o.y. in September, KSH confirmed. The work−day adjusted index rose 5.2% from a year earlier. Industrial output rose by a seasonally− and workday−adjusted 2.7% in a month−on−month comparison. Overall, domestic sales were up by 2% and export sales rose by 8%. Industrial output rose by 8.6% in January−September. SZIJJÁRTÓ ACCUSES AMERICA OF A ‘GROSS LIE’ Foreign Affairs and Trade Minister Péter Szijjártó was quoted saying that “America is accusing us of not abiding by the European legal system and of not being a party to Europe, which is a gross lie” in an interview published in Hungarian daily Magyar Nemzet. “On the basis of the facts, it is not possible to bring Hungary’s European and Transatlantic commitment into doubt,” the minister added in the interview, in which he expressed the Hungarian government’s intentions to sort issues out, and mend the recently worsened Hungarian–U.S. connection. Regarding the recent corruption issue that has worsened relations with America, the foreign minister said, “There are Hungarian private individuals who face accusations of corruption by the United States, and the government’s problem, however, concerns how to act on these matters [...] lacking information, we do not know which cases we must act on. If we get hold of information then the Hungarian authorities can decide on the basis on the norms of the law−governed state whether to launch a procedure or not. In a law−governed state you cannot start a procedure based on perceptions or insinuation.” Asked whether the goal of the dispute was to change the direction of Hungarian foreign policy, he said he thought it would be odd if the U.S. were to have a dim view of Hungary’s policy of opening to the East, when economic cooperation between Washington and Beijing is “enviably close”, adding that if a government puts its own interests in the forefront, this also serves
CPI DOWN, BUT ANALYSTS NOT FEARING DEFLATION The Consumer Price Index dropped 0.4% year−on−year in October, following a record 0.5% drop in September, according to data published by the Central Statistics Office (KSH). Analysts have been predicting flat prices for the rest of this year, but this latest price drop was greater than expected. Nonetheless, Gergely Tóth, an analyst from BudaCash, said deflation is not a problem yet. “We cannot talk about deflation, as the figures of the past month do not imply it. The unfavorable figures are due to the latest round of government−mandated utility tariff reductions,” he said. “The disappearance of the utility tariff reduction and expected rise of residential consumption will raise CPI. Further petrol price reductions might affect the index negatively, however the index is not expected to slip any further.” the interests of the alliance of which it is a member. On concerns about Hungary being in danger of becoming isolated, Szijjártó said that in the past two weeks he had met the foreign ministers of 17 countries and not a single one had raised this question or asked about the “current dispute”. OFFICIAL: NORWAY ‘BLACKMAILS’ HUNGARY A Hungarian official today accused the Norwegian government of engaging in “blackmail” in reaction to last week’s suggestion by the Norwegian ambassador that the transfer of HUF 36 bln, suspended in May, might be put on ice until civil organization Ökotárs Foundation is able to carry on its work, Hungarian news agency MTI reported on November 10. Nándor Csepreghy, deputy cabinet state secretary for development policy communications, reportedly said on public television that it “certainly is blackmail”, and added that Hungary is considering taking legal action. Csepreghy emphasized that the two countries signed an agreement under which Hungary is entitled to the HUF 36 bln grant currently in question. Accordingly, Hungary does not impose customs duty on Norwegian products and services, under the same rules that pertain to the EU market. “Now the Norwegian government is saying that while we have a dispute about an entirely different issue, we will not finance the funds which, according to the contract, are due to Hungary,” he said. The Hungarian government had claimed that some NGOs are misusing the money and spending it on anti−government activities. After Norway rejected that claim, some NGO offices were raided by investigators, sparking an outcry
from the Norwegians. Csepreghy insisted that the investigation of the government control office (KEHI) into Ökotárs was purely in connection with suspicions of “various infractions of regulations supported by substantive formulations and facts”. He found the ambassador’s comments to be “incomprehensible”, given that they suggest that the Hungarian government would be able to influence a police investigation, he added. He noted that the Prime Minister’s Office had not received an official reply from Norway regarding cabinet chief János Lázár’s invitation to discuss the matter in person, although at a press conference in Budapest last week, ambassador Skarstein said that Norway had rejected Lázár’s invitation. FX LOAN CONVERSION COULD TAKE PLACE IN FIRST HALF OF 2015 The Justice Ministry said that a bill on FX loan conversion will make it possible to carry out the conversion parallel with the compensation of borrowers, in the first half of 2015. The ministry said in a statement that it expects to submit a bill on “fair banks” to Parliament on November 11 and the bill on the conversion of FX loans into forints could follow on November 14. The bill on fair banks will specify stricter conditions for retail loans, taking into account consumer protection aspects. The FX loan conversion bill will apply only to mortgages, the Justice Ministry said. The bill will specify, however, that banks must apply the new conditions set by the fair banks legislation to all earlier FX−based retail contracts, the ministry added. The loan conversion bill is based on an agreement between the government and the Hungarian Banking Association, the ministry said.
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Budapest Business Journal | November 14 – November 27, 2014
MACRO Speaking X of figures The Budapest Business Journal presents some of the most important macro data of the past fortnight.
701 Number of patents filed in Hungary in 2013 – a drop from 2012 when a total
Crowds gather on Dób utca for the November 9 March in Budapest. Below is the November 8 protest in Pécs.
of 743 patents were filed – according
About 10,000 joined the third such march in less than a month, this time to demand the resignation of the head of the tax authority. BBJ STAFF
An estimated 10,000 people marched through Budapest on November 9 in a demonstration calling for the resignation of the top management of Hungary’s tax and customs authority (NAV). This was the third mass protest against the Fidesz Government in the past month, and Hungarian news portal index.hu speculates that a new opposition is emerging to the center−right government. A few days earlier, the head of NAV, Ildikó Vida, made her first public appearance since having her name linked to corruption charges by the United States. Vida confirmed in a interview published by mno.hu on November 5 that she had been told by U.S. officials that she was suspected of corruption, and therefore ADVERTISEMENT
banned from entry into the United States, but she rejected the charges. Speakers at the demonstration included András Horváth, a whistleblower who used to work for NAV and complained about misdeeds, but eventually resigned when his complaints went unheeded. Along with other speakers, he questioned the integrity of the government. As with previous demonstrations, the crowd at this demonstration, which started in the Seventh District and ended at József Nádor tér in the Fifth District, expressed general complaints about the government. The march went peacefully. Also mirroring the previous demonstrations, which apparently forced the government to back away from a proposed internet tax,
speakers in Budapest on November 9 gave an ultimatum: If Vida and her top managers do not resign in a week, another protest would be held on November 17 – in the capital and in many other cities as well. Already, on November 8, there was a gathering of demonstrators in front of the tax building in Pécs who expressed their objections to Vida. The protesters said that, after November 17, they would not be asking anymore, but would use civil disobedience to force the government to back down. Their answer came the next day, when Economy Minister Mihály Varga told Hungarian Public Radio that Vida would stay. The minister did not mention the protest that had taken place the evening before, but said that the United States accused Vida with no evidence, so her dismissal “would be the worst option”. Varga insisted that the entry ban was a cover for “some political motive” and echoed the government’s request for any details in the case. Should the U.S. indicate the details of the case against Vida, Hungary would start an investigation immediately, the minister said. The American Embassy has said repeatedly that banning foreigners on corruption charges is an internal decision, based on a so−called anti−kleptocracy law, and the details of investigations related to those decisions are not revealed to anyone.
€7.834 bln Hard currency reserves released by the National Bank of Hungary on November 10, in order to help banks convert their foreign currency denominated loans.
12 mln Number of packages the state−owned postal company, Magyar Posta, expects to deliver this year, which is 1/3 of the delivery market.
Source: KSH, MTI
Yet another anti-government demo
to a November 12 report from the National Office of Intellectual Rights.
BBJ
2Business Richter marks 20 years on BSE
COMPANY
Photo: MTI: Zoltán Mázhé
NEWS Bogsch Erik, CEO of Richter Gedeon Nyrt., starts the day’s trading on the Budapest Stock Exchange (BSE) by ringing the bell on November 11. Richter, the mighty bluechip that is third on the exchange in terms of volume, entered the bourse 20 years ago. On the left is Bálint Szécsényi, vice president of BSE, on the right is Zsolt Katona, the CEO of the BSE. In the two decades since Richter entered the market, the price of the company’s shares has shown a 28-fold increase. ADVERTISEMENT
AUDI LAUNCHES PRODUCTION OF NEXT-GENERATION TT ROADSTER In line with previous rumors, German carmaker Audi launched production of the third−generation TT Roadster model at its plant in Győr (northwestern Hungary) on November 5. Managing director Thomas Faustmann noted that the Audi plant had turned out more than 100,000 vehicles since full vehicle production started in June 2013, adding that the TT is now a “real Hungaricum” as it is only produced in Hungary. The components of the new model are also predominantly produced in Hungary. Audi AG chairman Rupert Stadler said Audi’s presence in the country was “deep− rooted” and called it “an important engine of growth” for the whole company. Prime Minister Viktor Orbán acknowledged Audi’s long−standing cooperation with Hungarian business partners and its investment in the country, pinpointing that the company capitalized locally on Hungarian knowledge and talent instead of draining it. Audi Hungária also produces the TT Coupé, A3 Sedan and A3 Cabriolet models. Last year, the base made 1,925,636 engines and 42,851 automobiles. ZWACK PROFIT FALLS ON HIGHER TAX, LOWER FINANCIAL INCOME After−tax profit of Zwack Unicum, Hungary’s best−known spirits maker, fell 12% to HUF 587 mln in the first half from the same period a year earlier as taxes rose and financial income fell, an earnings report showed on November 5. Sales net of excise tax were flat at HUF 5.6 bln, but material costs dropped 3% to HUF 2.4 bln, raising gross margin by 2% to HUF 3.2 bln. Operating costs rose about 2% to HUF 2.7 bln. Operating profit climbed 12.4% to HUF 762 mln. The bottom line was hit by lower financial profit, just HUF 40 mln, compared to almost HUF 100 mln in the base period, as well as HUF 215 mln in tax, nearly double the amount in the same period a year earlier. RUSSIAN RUBLE’S DEPRECIATION HITS RICHTER Hungarian pharmaceutical drug producer Richter will release its earnings report for Q3 this week. The analysts project a major decline in key profits. The main reason for this is 5% depreciation of Russia’s ruble to the HUF in the third
quarter of 2014. The ruble exchange rate is one of the most important factors affecting Richter’s profitability. Russia has been the company’s largest market for a long time and contributes more than 30% of group revenues. Following the previous quarterly earnings report, Richter lowered its estimates for both countries for 2014. Analysts predict Russian sales revenues will disappoint again, especially as the base period showed a relatively strong performance. Conversely, Western Europe fared relatively well in the third quarter. Analysts agree that Richter will report 61.5% gross margin for Q3, which would mark a 1% year−on−year deterioration. As for Richter’s EBIT, the market forecasts a large year−on−year contraction of about 30%. Analysts also likely factored in a further rise in operating costs, since clinical trials continue to absorb large funds, and will also have considered expansions in China and Latin America. The market sees Richter’s Q3 operating margin at around 11%, decreasing about 4% compared to the same period in 2013. Richter’s net profit is seen even more drastically down in the annual comparison than its EBIT and it is also likely that the market expects negative financial income. The end−quarter EUR/ HUF exchange rate was similar to the end−Q2 figure. Consequently, the key factor here was the ruble as well. The HUF was around 6% stronger to the RUB at the end of September than at the end of June, which could have led to unrealized losses at the revaluation of assets booked in RUB. BUSINESS ASSOCIATION OPPOSES SUNDAY CLOSURES The Hungarian Association of Shopping Centers (MBSZ) warned that the government’s recent proposal to restrict retailers’ opening times on Sunday would have serious consequences, Hungarian news agency MTI reported on November 3. KDNP, a member of the governing alliance, said on Friday that an initiative to prohibit all but family−owned retailers from doing businesses on Sundays was “in line with the expectations of most people, both on the part of employees and consumers”. According to MBSZ such restrictions would force businesses to lay off a total of 35,000 people, while also cutting sales and revenue; a concern that would be further aggravated by the
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increased sales tax proposed for 2015. Catering businesses would be particularly hard hit. MBSZ added that applying the restriction only to businesses larger than 400 sqm was also discriminatory. Business association VOSZ will start collecting signatures for a referendum if Parliament adopts the law keeping big shops closed on Sundays, VOSZ head Ferenc Dávid told MTI on November 10. In a statement, Dávid expressed “shock and worry” that “interest groups in and outside Parliament” were seeking to “deliberately jeopardize or eliminate jobs in commerce”. A closure of retail units on Sunday would automatically eliminate tens of thousands of positions, the statement said, and noted that Hungary’s rate of unemployment was still above 7%.
MASTERPLAST SEES A 51% RISE IN PROFITS Hungarian building materials company Masterplast saw a 51% rise of its after− tax profit, which reached almost €1.6 mln year−on−year on a widening margin, an earnings report published on November 12 reveals. The company’s revenue edged up 1% exceeding €26 mln, while direct cost of sales inched down 1% to almost €21.5 mln with payroll costs falling by 17% to approximately €1.9 mln. Operating profit was up by 20% at €2.2 mln. Sales in Hungary accounted for 26% of revenue in the thrid quarter, meanwhile sales in Romania accounted for 16%, and the company also recorded big sales in Serbia, Ukraine and Slovkia.
SBERBANK HUNGARY APPOINTS RICHARD SZABÓ AS CEO Richard Szabó has been appointed as Chairman and CEO of Sberbank Hungary effective October 22, 2014. He succeeds Axel Hummel, who has been appointed as CEO of Sberbank Europe AG. Szabó continues to manage Corporate Banking in addition to his CEO responsibilities. Szabó has wide experience in finance and corporate banking. He joined Sberbank Hungary (Volskbank Hungary at that time) in November 2012 as a member of the management board for corporate business. Prior to this he worked as the corporate board member of Volksbank Slovakia (Sberbank Slovakia now) for six years, and was the general manager of AIG Funds Central Europe between 2005 and 2006. Before 2005 Szabó spent seven years at UniCredit Bank Slovakia where he held various manager positions. He graduated from Webster University with a MBA in banking and corporate finance. He also acquired a PhD degree in international economics at the Economic University, Bratislava.
LINUSZ CHARGES SGH AVIATION ACQUIRES AIRPORT ILLEGALLY The Hungarian individual who failed to acquire the assets of a regional airport near Lake Balaton in the fall is now contesting the sale in court, Hungarian news agency MTI reported on November 12. Imre Linusz, who specializes in assets under liquidation, told the agency that he was contesting the sale with the Zalaegerszeg Court in western Hungary, because he believes that the contract signed with SGH Aviation was illegal on several points. Linusz, who is reported to be backed by a group of British investors, won the tender for the Sármellék airport (also known as Hévíz−Balaton Airport) assets in July, but failed to pay the HUF 800 mln purchase price on time, according to press reports. The assets were acquired by a competitor, SGH Aviation, which is owned by Gábor Széles, one of Hungary’s richest businessmen.
GREINER BIO-ONE TO INVEST HUF 2 BLN IN HUNGARY an Austrian Greiner Bio−One, manufacturer of disposable health care products, said it would invest HUF 2 bln (€6.5 mln) in the construction of a new 2,000 sqm production hall at its site Mosonmagyaróvár, west Hungary. The project is scheduled to be completed by the beginning of 2017. It will raise production space to 11,000 sqm. The development is expected to double the unit’s exports in three years, managing director László Balogh said. The investment will create up to 50 new jobs at the unit which employs 160 at present, he said. The company plans further developments from 2017 on, mainly in the field of logistics, Balogh said. Greiner Bio−One Hungary plans revenue of HUF 4.1 bln after HUF 3.6 bln in 2013 and projects revenue of HUF 3.9 bln in 2014. WIZZ AIR ENTERS PARTNERSHIP WITH RENTALCARS.COM Hungary−based low−cost airline Wizz Air announced on November 12 that it has entered into partnership with the world’s largest car hire booking service, rentalcars. com, and would provide 24/7 customer care in multiple languages for clients. In line with the partnership rentalcar.com vehicles would become available at every airport Wizz Air regularly flies to. Car rentals can be handled at the same time as booking a flight, thus clients can pay for both the rented cars and their airport tickets at the same time.
PANNERGY UNITS RECEIVE €18 MLN EXIMBANK LOAN Hungary−based geothermal energy company PannErgy announced yesterday that two of its units withdrew a total of €18 mln in loans from the Hungarian Export− Import Bank to finance a project near Győr in northwestern Hungary. PannErgy began drilling thermal wells in Pér located on the outskirts of the city of Győr, in June. The heat generated from the wells is expected to supply the city of Győr as well as German car manufacturer Audi’s nearby plant. PannErgy was awarded a €1 bln European Union and state grant for the project. GRAPHISOFT PARK Q3 PROFIT CLIMBS BY MORE THAN ONE-THIRD Graphisoft Park, a listed company that owns and operates a business park in the north of Budapest, saw a rise of 33.7% in after tax profit, reaching €655,000 in Q3 year−on−year, its earnings report revealed late on November 6. Revenue grew by 5.3%, reaching €2.12 mln with the operating profit rising by 4.1% to €893,000. The high profit was also fueled by an exchange rate gain of €116,000. Graphisoft Park reported the park ’s occupancy rate at 95% at the time of the report’s publication, finally returning to pre−crisis levels. The company is raising its net profit guidance by €200,000 to €2,300,000 for the year, due to newly signed leases, and it is also targeting a net profit of €2.8 mln in 2015. MÉDIACSOPORT SELLS TWO TV CHANNELS Zoltán Varga CEO of Centrál Médiacsoport announced on November 5 that his company sold TV channels Story 4 and Story 5, assets it obtained when it
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Photo: MTI: Tamás Kovács
Budapest Business Journal | November 14 – November 27, 2014
MOL TO TAKE OIL FROM KURDISTAN An oil worker is shown at the Bijeel 6 well located near Akri in the Kurdistan region of Iraq on November 11. MOL Kalegran, the subsidy of Hungarian oil and gas company MOL, has been operating in Kurdistan since 2007 as the operator of the Akri−Bijeel block. The subsidiary recently announced two findings of commercial value in the block, and the development plans for the block have been approved by the regional Ministry of Human Resources in Kurdistan.
purchased Sanoma earlier this year for HUF 17 bln. It has already sold one other former Sonoma product, the jobs site profession.hu, for HUF 8 bln. CSABA METAL SPENDS HUF 1 BLN ON EXPANSION Hungarian−owned automotive industry supplier Csaba Metál announced it would invest HUF 1 bln on an expansion at its base in Békéscsaba in southeastern Hungary, owner Béla Majoros informed Hungarian news agency MTI on November 4. The company is expanding its complex with a
3,800 sqm production hall and warehouse in order to raise its aluminum production capacity. The project was funded with a HUF 500 mln European Union and state grant. This year, Csaba Metál expects to make a revenue of HUF 10.5 bln, up from HUF 10 bln in 2013. Exports generate three−fourths of its turnover. The company currently employs approximately 700 people, but headcount stands at over 900 including contracted laborers and apprentices. Csaba Metál supplies Volkswagen, BMW, Trelleborg, Delphi, Conti, Hella and ZF.
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Budapest Business Journal | November 14 – November 27, 2014
Residential real estate on the up As the economy improves, the country finally has hope of enjoying the boom seen by the neighbors. DAVID LAWRENCE
Hungary has missed out on the housing boom currently ongoing in major cities in Poland and the Czech Republic, reflecting the expanding economies in those two countries and the weak economic performance of Hungary in recent years. However, a recovery is now underway in Hungary’s residential market where interest rates remain low and GDP growth is exceeding 3%. Budapest currently has the second lowest average per sqm residential prices of EU capitals, with only Bulgaria having lower prices. A continued recovery from the low of 2009 in the aftermath of the economic downturn and Eurozone crisis relies on continuing low interest rates and rising GDP. “We are seeing a 15−20% increase in turnover in the housing market,” commented Attila Déry, senior analyst at the residential consultants Otthon Centrum. The company has offices across the Budapest agglomeration and further offices outside of the capital, and is looking to extend its network in 2015. He argues that there are two main factors behind the increase in turnover. Firstly, investors are taking their savings from bank accounts and putting their funds into the residential market because of the very low interest rates, as opposed to the higher yields of around 7−8% that are attainable in letting residential properties in Budapest. Yields in Budapest are put at a little higher than other major cities, but for example in Győr and the cities around the western border of Hungary yields of 6, 7, or 8% can be counted on. Yields of
around 6−7% can be attained in major cities such as Debrecen, Miskolc and Szeged in eastern Hungary, where there are universities and large labor markets. According to Otthon Centrum analysis, residential prices will start to increase in the next two years, although it remains to be seen whether this will be backed by increasing mortgage lending by the banks. “I think that the residential market will regain its pre− economic crisis strength in three or four years in terms of turnover. The price increases will be steady rather than steep. So we won’t see a surge in prices,” said Déry. Foreigners are tending to make purchases in Budapest, especially in the central fifth, sixth and seventh districts of Pest, or in the second and twelfth districts of Buda, and along the northern borders of Hungary. “Foreign buyers fled the country after the crisis hit the market in 2009, but they are coming back right now,” Déry explained. “If I had to make an educated guess, then I would say that around 10% of the buyers in the fifth district are foreigners. In addition people from Austria and Slovakia are buying properties in nearby towns on the borders due to lower prices and perhaps because they have family connections there,” he continued. The price gap between Hungary and, for example, Prague and Warsaw is expected to narrow but a significant gap will remain in the short−term. Although the nationalities of buyers can be difficult to determine, because EU citizens do not require a permit, the nationalities of flat and house buyers is described as mixed. In Budapest and also in the countryside there are a lot of Italian and German buyers and, outside of the EU, Americans, Chinese and Russian buyers. “Right now is the time to invest because price increases are just around the corner. If you look at a five−year period then you should be counting on a 15−20 increase in this period,” concluded Déry.
A good place for deals: Downtown Debrecen.
The massive urban renewal at Corvin Promenade.
Corvin Promenade wins prestigious award The massive project to renew a once−neglected section of District VIII gains international recognition. DAVID LAWRENCE
The Corvin Promenade urban rehabilitation project by the Hungarian− based CEE developer Futureal has won the 2014 “Global Award for Excellence” of the Urban Land Institute. Futureal says the Corvin Promenade is the largest urban rehabilitation project in Budapest and that there has been no project of this scale in Budapest since the construction of Andrássy út, completed in 1896. The project has been undertaken on around 22 hectares that underwent full infrastructural, architectural and environmental reconstruction as a result of cooperation between Futureal and the Józsefváros Municipality. The complex consists of a 33,000 sqm shopping center, 6,000 sqm of street front retail, cafe and restaurant space, five residential complexes (a sixth is under construction) and five office complexes, with a further office center due to be completed at the end of the year. The Urban Land Institute is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has more than 32,000 members representing all aspects of land use and development disciplines. “The Corvin Promenade project was the first urban rehabilitation project
in the district. The renewal of the Corvin Quarter has become one of the symbols of the reconstruction of Józsefváros,” said Dr. Máté Kocsis, Mayor of Józsefváros. “This project is one of the biggest and most complex urban rehabilitation programs in Central Europe and has created a new, modern and high−quality urban center. Thanks to the excellent cooperation between the local municipality and Futureal Group, there are circa 1,200 apartments, 50,000 sqm of office space, more than 100 retail units, the biggest sports center in the area has been created and the surrounding streets have also been renewed,” the mayor added. “This project has strengthened the attractiveness of Józsefváros and improved its image, so it has deservedly earned yet another professional award.” Gábor Futó, founder of Futureal commented: “We are proud that Corvin Promenade has won perhaps the most prestigious award in the real estate industry. In cooperation with the district municipality, we created the vision of a livable city quarter in 2004, where high− quality public transport and the widest range of services satisfy the needs of the residents, people working there as well as of visitors. A project of immense scale, it has started successfully and defied the international economic and real estate crisis. Thanks to the unique urban rehabilitation concept, Corvin Promenade was born and became the catalyst of the development of a whole district. The Urban Land Institute recognized all this with its Global Award for Excellence, established in 1979.” The award ceremony was held in New York in October. Futureal’s Chief Architects, Gábor Radványi and Gábor Kovács, and the project’s mastermind, urbanist György Alföldi of RÉV8 Zrt., received the award.
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Budapest Business Journal | November 14 – November 27, 2014
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this special report is sponsored by DTZ
THE PROPERTY ADVISER www.dtz.com +36 1 269 6999
REAL ESTATE NEWS DTZ: Valuers following the market in leading position
The real estate community used to debate about who is to blame for the property crisis after 2008. Among those accused of having contributed to the aggressive price spiral, overwhelming number of transactions and subsequent plummeting of markets, valuers are regularly among the top three. Let us get one thing straight: Valuers are followers of markets, not leaders of them. At least that is what they should be doing. It follows that if a valuer acted prudently and with integrity within the rules of his profession, he certainly could not have contributed to the spiral. By definition market value comes from market evidence, and evidence is what a professional observes.
The new storage space. MINI STORAGE GROWS The Canadian Euro Mini Storage has added 106 storage units to its Budapest facility in Gyáli út in the 9th district of Budapest, following an investment of €100,000. The first purpose-built self storage facility in Hungary previously had a gross area of 7,800 sqm on three floors. Euro Mini Storage decided to add new storage space upon reaching a 95 percent capacity of the existing units on a long term basis. “The new space required by the company’s customers proved to be much needed, so we took the decision to build another 106 storage units. Also, the market is in a vibrant state, and with the help of the recovery of the Hungarian economy we saw an increased demand that confirmed to us that this was the best moment for an investment,” said Danu Temelie, Euro Mini Storage Managing Partner for Romania and Hungary. Euro Mini Storage have deployed a wide array of security measures including 24-hour camera surveillance, building alarm systems, computerised gate access and individually alarmed self-storage units. KSH: CONSTRUCTION OUTPUT CLIMBS 27% Output of Hungary’s construction sector climbed 27% year-on-year in the first nine months of 2014, the Central Statistics Office (KSH) said in its report published yesterday. Compared to the same period of the previous year, 9% fewer homes were built in larger towns, while there were increases of 44% and 56% in smaller towns and villages, respectively. At the same time, there was a 31% increase in the number of homes receiving occupancy permits in Budapest. In the first nine months of 2014, the composition of the group of builders has slightly changed year-on-year. The
proportion of homes built by individuals grew from 57% to 61% and the proportion of homes built by businesses fell from 40% to 38%. Of the homes built in Budapest, 67% of were built by entrepreneurs. GKI: PROPERTY INDEX CLIMBS The National Property Index,which is a biannual gauge of supply and demand as well as expectations of market players collected by economic research institute GKI, rose by almost three points reaching 105.5 in October, GKI reported today. The gauge of the property market in the capital also rose by three points from April, reaching 109 in October. The indices are above the 100 mark, which reveales average conditions for the second time since the middle of 2008. GKI expects new home prices in Budapest to rise 1% in the upcoming period, while prices of resale homes are expected to edge up 0.7%. GKI said six of every 1,000 households has firm plans to buy or build a home, while 23 want to renovate or expand their homes. MANAGER NAMED FOR LUXURY HOTEL AT PARIS UDVAR The Dubai-owned Hungarian hotel developer and operator, Mellow Mood has appointed Óbud-Újak as project manager for the redevelopment of the Paris Udvar building into a 4-5 star hotel. A permit has been obtained by Mellow Mood for the reconstruction of the listed building in the central 5th district of Budapest and a circa 15,000 sqm hotel is planned to deliver by mid 2007. Mellow Mood has developed 13 hotels in Hungary ranging from luxury hotels to a high end hostel. Óbud-Újak acted as project manager on the redevelopment of the New York Palace by the Boscolo Group.
But what does it mean to follow the market? It is to have regard to all available transactional and anecdotal information that allows one to form a reasoned opinion of value, source and depth of demand – eventually the main details of a potential transaction. It involves modeling the observed behavior of vendors and purchasers, and understanding market perception. What is not allowed, though, is to make special assumptions that would only be applicable to certain situations or specific buyers, except for valuations prepared for special purposes. Due to such erroneous assumptions and erroneous definitions of “bases of value”, a number of pre-2008 valuations were probably wrong then, let alone today. The turbulent times are behind us though. Hopefully all stakeholders, vendors, purchasers, bankers, and valuers, have learned the lessons. Valuation today is more than just ticking the box for formal requirements of loan security, financial reporting or transactions. There is an increasing requirement from clients for a detailed property analysis and added value advice. A prudent bank is willing to invest into resources to understand the risks involved in a mortgaged property. A quality valuation report today provides full details of the property, relevant market, current and pipeline competition, potential income and value fluctuations, and asset management requirements, to name only a few aspects. The market value is important, but it is just a conclusion of all of the analysis that goes into a valuation report. So it is actually worth reading the report, as it explains the context of the property in an independent manner. And it is worth having the right valuation services provider, too. In today’s recovering real estates markets there is more evidence available to justify the next transaction. That also allows us to deliver valuations that are less uncertain compared to those in the less active years.
Adrián Limp Director, Head of Valuation More transactions mean more evidence and lower valuation margins of error, to the benefit of the market as a whole. That does not mean the market has become fully transparent, but it has certainly become more sophisticated. There is a flight to quality but at the same time there is also a flight to opportunity. “Prime” or “secondary” are not good enough to describe properties anymore. There are properties where a bit of (or a lot of) investment and better asset management could unearth more value. Certain types of investors look for assets that have the potential to deliver IRRs in excess of 16-18%, still at manageable risk levels. And there are some of those opportunities out there. It just requires the right professionals to recognize and unearth them. Whilst there have been a number of transactions of large retail and industrial assets, the most active sector by number or deals is offices. Lot sizes of €1 to €20 million are typical but there are larger ones too. The flight to opportunity is strongly observable: distressed asset owners and landlords willing to reallocate their portfolios are met by the right buyers having the available finance. It is good to see some foreign buyers coming back and fresh Hungarian private and institutional money flowing into property; it is an encouraging start. It will be even more exciting once the large Western, mainly German investors return and overseas investors start investing. And depending on the country’s ability to retain the positive momentum, those times might not be too far away. So whose fault was the property crisis? To some extent, everyone’s, but this does not matter anymore. What matters is to learn from past mistakes, draw the right conclusions and price transactions properly based on an in-depth analysis. And, of course, to choose the right service provider to deliver the above, in all areas.
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Budapest Business Journal | November 14 – November 27, 2014
Experts share tips for staying competitive At a seminar and conference organized by the Budapest Business Journal, successful business people spoke about how they address competition.
added value of HUF 240 bln, which is approximately 5% of total exports, he said. Software exports can be broken down as follows: 53% multinationals, 29% domestic companies, 10% startups and 8% international. “Hungarian startups are a driving force for the country’s economy,” Vityi noted, an argument supported by recent data suggesting that 12% of Hungary’s GDP is provided by the IT sector, while only a total of 150,000 people work in the area. LogMeIn, founded in 2003, makes up 80% of the capitalization of Magyar Telekom, the Hungarian subsidiary of German telecoms giant Deutsche Telekom. “Technological development is undeniably fast, and the ‘Internet of Things’ could be the key for competitiveness and the success for Hungary,” Vityi argued referring to the interconnection of uniquely identifiable embedded computing devices within the existing internet infrastructure.
For individual companies, staying in business requires staying competitive. But what does it take to be competitive? A daylong seminar, entitled “Competitiveness Vision”, organized by the Budapest Business Journal, addressed this question. More than 100 participants from different business sectors attended the conference at Budapest’s Gerbeaud House on November 5. The CEO of AmCham Hungary Irisz Lippai−Nagy opened the conference with a brief talk in which she noted that there is no life without competition. We keep comparing ourselves to others and we strive to beat them from a very early age. “Competition is the main driver for how the world works; it motivates us, thus the world moves forward, explorations are made and innovation and continuous improvement take place,” Lippai−Nagy said. “It is an inherent, inborn force, which is required for both survival and success,” she added. “The most difficult and beneficial competition is the one when we are trying to beat ourselves.” INNOVATION IS COMPETITIVENESS “Competitiveness remains the key to sustainable growth and a more attractive Europe,” Botond Rencz from EY said, referring to the company’s European attractiveness survey, which is based on a two−fold, original methodology that reflects the “real” attractiveness of Europe for foreign investors and the “perceived” attractiveness of Europe and its competitors by foreign investors. “Restoring growth and prosperity requires a stronger focus on industrial
Irisz Lippai-Nagy.
Dr. Tamás Lőcsei.
Péter Vityi.
competitiveness, while innovation− intensive activities — like software, pharma, scientific research — boost Europe’s attractiveness,” he argued. “R&D is expected to drive Europe’s FDI in the future, there is a tendency of an ecosystem−related approach toward innovation and entrepreneurship and the expected appearance of innovative and so−called ‘smart’ cities all raise Europe’s attractiveness.”
EXPORTING THE INTERNET OF THINGS “A country’s competitiveness can be measured by how much it exports,” Péter Vityi, deputy president of the ICT Association of Hungary said, adding, “The Hungarian IT sector significantly contributes to the economic growth of the country.” Software exports in October added up a total of HUF 275 bln which was 1% of exports, with an
Botond Rencz.
GLOBAL ASPIRATIONS AND THE HUMAN FACTOR “Based on PwC’s survey exploring what CEOs in Hungary think about the current economic situation and competitiveness we can be optimistic about the future,” Dr. Tamás Lőcsei from PwC Hungary said. “The survey shows that competiveness in Hungary was triggered by the arrival of multinationals,” Lőcsei added emphasizing, “Multinationals engage in cooperation with local firms, educate their global thinking and share global experiences.” This lead to the restructuring and opening up of the Hungarian market, and has made Hungary more competitive on the worldwide market. Lőcsei added that the main success factors besides innovation are the modernization of the labor markets, access to skills and labor mobility, further economic integration, cuts in regulations (through the reduction of bureaucracy) and developing a culture of innovation and creativity. Although the roundtable participants engaged in healthy disagreement, all of them jointly agreed that being competitive means thinking globally. “If a firm focuses on being competitive only in the Hungarian market, most probably it will not be
Photos: Marianna Sárközy
CHRISTIAN KESZTHELYI
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2 Business
Budapest Business Journal | November 14 – November 27, 2014
Péter Balogh.
successful,” NNG CEO Péter Balogh said. “For gaining success, you have to think and act globally, you have to work with an international team, to merge international knowledge and experiences. These are the main facets driving competitiveness,” Balogh added. He also emphasized that if you want to be competitive with your product you need to employ foreign salespeople, as Hungarians are not ready culturally to sell on the global market. The speakers also agreed that the human factor is one of the most important facets of competitiveness. You can only be competitive with your firm given the fact that you are innovative and can motivate your employees. The most important values of the firm are ADVERTISEMENT
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Dr. Zoltán Pogátsa.
the values brought and generated by the employees, thus motivating their creativity is the basic principle, which drives competitiveness. Being proactive is also significant, you have to execute your plans, and a quotation from Steve Jobs – “Innovation without execution is hallucination” – quickly became one of the main ideas of the conference. OUTLOOK FOR HUNGARY “Economic growth of Hungary has undoubtedly started, the only question is whether it is sustainable,” Dr. Zoltán Pogátsa from the University of West Hungary said. “Fiscal alcoholism [or irresponsible spending] and inflation have ceased to exist and the growth
of state debt has recently slowed down,” he added. The most significant factors of growth are capital and workforce. Hungary currently has many skilled workers and the “Funding for Growth Scheme” is providing capital for the model of growth. Pogátsa said that since the launch of the scheme, economic growth in the country had been boosted and employment and salaries have grown. SPONSORS: ETOParkHOTEL_alogoFULL_P276C.pdf
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However, “V4 countries have a wage of €2/ hour as compared to northwestern Europe where the same measure is €12/hour,” Pogátsa added. “Since 2003 there has been a drop in money invested in education in Hungary and this is reflected by the PISA survey, in which Hungary has gradually been performing worse since 2000,” he noted. Regarding the future this poses a threat to the available workforce, an issue that needs to be addressed.
GRUPPO T.F.M. KFT. 1068 Budapest, Király u. 102.
1ST DISTRICT
3RD DISTRICT
6TH DISTRICT
10TH DISTRICT
12TH DISTRICT
15TH DISTRICT
48 SQM – 1 ROOM + HALL, ATTILA STREET
100 SQM – 4 ROOMS, BELSŐ ÓBUDA
186 SQM – 7 ROOMS, ANKER LANE
250 SQM – 9 ROOMS, GITÁR STREET
28 SQM – 1 ROOM, GAÁL JÓZSEF STREET
155 SQM – 4 ROOMS, PESTÚJHELY
At the bottom of the Buda Castle, this completely renovated, very quiet and bright, garden facing apartment is situated in a Bauhaus style building.
In a new building, this sunny apartment has very spacious living room, 2 bathrooms, private gas heating and 2 balconies. Garage possibility for 5.000.000 HUF.
This large apartment is situated within a period building at the corner of Deák Square. At the moment it is rented for a long term, and would be available with the ongoing contract.
This very spacious and bright villa house that needs renovation has 1373 sqm of lot, 2 entrances and it is located in a very quiet and green area. Good connection to public transport.
This quiet, garden facing apartment that needs renovation has private gas heating and it is situated in a condominium in good condition, on the Buda hillside.
In a quiet side street, 2 family houses (95 sqm + 60 sqm) has 715 sqm of lot. Both houses have terraces and parking spaces in the garden.
13.900.000 HUF
39.900.000 HUF
59.000.000 HUF
65.000.000 HUF
9.700.000 Ft
49.000.000 HUF
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1ST DISTRICT
+36.1.430.1403
3RD DISTRICT
+36.70.3156.087
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10TH DISTRICT
68 SQM – 3 ROOMS, HATTYÚ STREET
173 SQM – 4 ROOMS, KEVE STREET
45 SQM – 2 ROOMS, DAMJANICH STREET
990 SQM – 20 ROOMS, SÖRGYÁR STREET
58 SQM – 2 ROOMS, KRISZTINA CIRCUIT
122 SQM – 4 ROOMS, SASHALOM
This sunny, garden facing apartment that needs renovation has separate rooms, balcony and it is situated in a well maintained building with elevator.
In a renovated villa house, this renovated, triplex apartment has 18 sqm terrace, 3 bathrooms and 151 sqm private garden and it is located in a very quiet, green area.
This very sunny, garden facing, high floor apartment has separate rooms, balcony and parking space in the courtyard. It is situated in a building with elevator close to the City Park.
This two storey villa house that needs renovation has 8.392 sqm of lot, original oak staircase, nice garden and it was the summer residence of a famous Hungarian brewer family.
This bright, street facing apartment that needs renovation has balcony, parking space and it is situated in a well maintained building.
This spacious, well divided, two storey family house has 406 sqm of lot, 2 bathrooms, 13 sqm terrace, garage and it is located in a quiet side street.
21.500.000 HUF
68.900.000 HUF
13.900.000 HUF
120.000.000 HUF
+36.1.201.0403
2ND DISTRICT
+36.1.430.1403
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+36.70.322.3697
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+36.70.268.5017
11TH DISTRICT
12TH DISTRICT
+36.70.398.8754
13.500.000 HUF
+36.1.789.2846
16TH DISTRICT
27.900.000 HUF
13TH DISTRICT
+36.70.337.2499
16TH DISTRICT
123 SQM – 4 ROOMS + HALL, FÉNYES ELEK STR.
83 SQM – 5 ROOMS, GYERTYALÁNG STREET
107 SQM – 4 ROOMS, ROTTENBILLER STREET
40 SQM – 2 ROOMS, IBRAHIM STREET
58 SQM - 2 ROOMS, TEVE STREET
150 SQM – 5 ROOMS, PETŐFIKERT
This very spacious, well divided, street and garden facing apartment that needs renovation has separate rooms private gas heating and it is located next to the Mammut shopping mall.
In a new building, this very sunny, duplex mansard apartment has balcony, two bathrooms and air conditioning system and it is located in the garden suburb area of the district.
This very spacious, street facing apartment in good condition has 2 bathrooms, private gas heating and it is situated in a nice period building with elevator.
In a new building with elevator, this completely renovated, very sunny, park facing, luxury apartment has fully fitted kitchen and balcony.
In a new building with elevator, this very quiet and bright apartment with open kitchen is located close to the Árpád Bridge. Good connection to public transport.
This two storey family house consists of 2 separate apartments with 1109 sqm of lot, 2 bathrooms, balcony, terrace and garage.
29.900.000 HUF
25.900.000 HUF
21.900.000 HUF
+36.1.336.1706
2ND DISTRICT
+36.1.782.7275
4TH DISTRICT
+36.70.322.3697
7TH DISTRICT
22.500.000 HUF
+36.1.784.0707
11TH DISTRICT
19.200.000 HUF
+36.70.414.7759
43.500.000 HUF
13TH DISTRICT
+36.70.337.2499
FOR RENT
75 SQM – 3 ROOMS, NYÚL STREET
75 SQM – 2 ROOMS, JEGENYEFA STREET
97 SQM – 3 ROOMS + HALL, KÁROLY CIRCUIT
80 SQM – 2 ROOMS, BARTÓK BÉLA STREET
102 SQM – 4 ROOMS, ST. ISTVÁN PARK
53 SQM – 2 ROOMS, VERES PÁLNÉ STREET
This completely renovated, well divided, garden facing apartment has separate rooms, 2 bathrooms, balcony and it is situated in a villa house with elevator and nice common garden.
This very well divided, well insulated family house has 422 sqm of lot, separate rooms and garage and it is located in a quiet side street.
Historical Jewish area. This sunny apartment is situated on a high floor within a nice Art Deco building, adjacent to the Main Synagogue, Hotel Astoria.
This completely renovated, very bright, street facing apartment has separate rooms and private gas heating and it is situated in a well maintained building.
Nice panorama over the Park and the Danube, this renovated, very spacious and sunny, high floor apartment with balcony is situated in a well maintained period building with elevator.
5th dist.: This exclusive style, completely renovated, furnished apartment has separate rooms, open kitchen and it is situated in a very nice period building with beautiful courtyard.
31.900.000 HUF
28.900.000 HUF
39.900.000 HUF
24.500.000 HUF
77.900.000 HUF
500 EUR/month
+36.1.336.1706
2ND DISTRICT
+36.1.782.7275
5TH DISTRICT
+36.70.3156.087
8TH DISTRICT
+36.1.784.0707
11TH DISTRICT
+36.70.414.7759
15TH DISTRICT
+36.70.322.3697
FOR RENT
116 SQM – 3 ROOMS + HALL, HŰVÖSVÖLGYI STR.
130 SQM – 4 ROOMS + HALL, KECSKEMÉTI STR.
86 SQM – 2 ROOMS, JÓZSEF CIRCUIT
108 SQM – 3 ROOMS, ÚJBUDA
200 SQM – 6 ROOMS, KERTVÁROS
82 SQM – 3 ROOMS, VÁCI STREET
In a completely renovated Bauhaus style villa house, this bright and spacious apartment has 2 bathrooms, terrace, garage and private garden.
This very well divided, street facing apartment that needs renovation has private gas heating and balcony and it is located next to universities.
This completely renovated, very bright, street facing apartment with separate rooms is situated in a renovated period building with elevator.
In a family house, this sunny mansard apartment with separate entrance, open kitchen, private gas heating, garage and common garden is located in a quiet side street.
This very sunny and well divided two storey family house has 567 sqm of lot, 2 bathrooms, balcony, terrace and garage and it is located in a quiet garden suburb area.
5th dist.: Panorama over the pedestrian Váci Street and the St. Michael’’s Church, this renovated, furnished apartment has separate rooms, open kitchen, 2 bathrooms and balcony.
47.000.000 HUF
64.900.000 HUF
20.900.000 HUF
29.900.000 HUF
37.500.000 HUF
220.000 HUF/month
+36.1.376.6080
+36.70.457.4943
+36.70.414.7126
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+36.70.398.8754
+36.70.322.3697
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2ND DISTRICT
5TH DISTRICT
9TH DISTRICT
11TH DISTRICT
256 SQM – 6 ROOMS, CSÉVI STREET
138 SQM – 4 ROOMS + HALL, GARIBALDI STR.
80 SQM – 4 ROOMS, MESTER STREET
95 SQM – 3 ROOMS, BARÁZDA STREET
This very spacious semi-detached house has 3 bathrooms, 4 balconies, private gas heating, 2 car garage and 500 sqm private garden behind the house and it is located in a quiet street.
This completely renovated, high floor apartment with separate rooms and beautiful panorama over the Danube from the big balcony is located adjacent to the Parliament.
Nice view over the city, this high floor, triplex apartment that needs renovation has private gas heating and it is situated in a period building with elevator.
This top floor apartment has 89 sqm terrace, separate rooms, 2 bathrooms, 2 wardrobe rooms, parking space and it is situated in a new building.
129.000.000 HUF
105.000.000 HUF
15.900.000 HUF
44.900.000 HUF
+36.1.376.6080
WWW.TECNOCASA.HU
+36.70.457.4943
+36.70.414.7126
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+36.1.720.2433
EACH AGENCY INDEPENDENTLY OWNED AND OPERATED. • THESE OFFERS ARE VALID, TILL THE APARTMENTS ARE SOLD. • THESE INFORMATION DO NOT CONSTITUTE A CONTRACTUAL ELEMENT.
BBJ
3Special Report
Retail banking/insurance
Banking on a good year As assets grow, private bankers and alternative service providers are looking forward to another strong year. GABRIELLA LOVAS
Hungary’s private banking sector is gearing up for a strong year again. Ample liquidity supported by global central banks combined with the low level of interest rates in Hungary encouraged clients to build real portfolios rather than keep their funds in bank deposits, János Dócs, CIB Head of Private Banking told the Budapest Business Journal. The more active money management meant a lot of banking fees for private banks. According to Portfolio.hu’s latest Private Banking Survey, client assets rose 6.9% to almost HUF 3 trillion in the first half of 2014. OTP had the biggest share of the private banking market with HUF 931 billion assets under management followed by Raiffeisen and MKB Bank. The biggest alternative provider in terms of clients’ assets was Concorde Securities. This year, the trends from 2013 are getting stronger, said András Kállay, Head of Private Banking at Erste Bank Hungary Zrt. Customer assets of both commercial banks’ private banking arms and independent providers have grown, with the latter gaining ground. The gap between private banking providers is further widening. As there is not enough new money in the market, weaker providers have no chance of catching up with the top players. “We have to fight for each and every client,” stressed Kállay. The currently observed transfer of assets from certain providers to others is being driven by higher yields. In an environment of low interest rates, it is getting increasingly difficult to obtain the 6−8% yields that were common in the past two or three years, Bertalan Nagy, Head of Private Banking at Equilor Investment Zrt. said. “However, there is no free lunch in the market, so in order to generate substantial yields, clients have to accept higher risks,” he added. Future growth can be based on the increase of the portfolios, although this is limited in the current low−yield environment, according to Dócs. Other options include a regrouping of assets previously deposited abroad and an increase of a private bank’s share within the total. Dócs also mentioned the bank’s premium customers as a natural base of the new generation of private banking clients. Following the current
OTP leads in private banking.
The pace of consolidation in the market is beginning to pick up. trend, CIB is considering an increase in the minimum amount required to open a private banking account. The average entry level in Hungary is at around HUF 70 million. Consolidation in the market is already gathering pace. Germany’s BayernLB sold MKB Bank to the Hungarian state in July. In terms of customer assets, MKB was ranked third among Hungary’s top private banking providers at the end of June 2014. As Citi is pulling out of consumer banking in Hungary, many providers are considering taking over its clients. When asked if Erste is interested, Kállay said the bank is open to every opportunity. The bank has gained experience in integrating private banking clients after taking over the clients of BNP Paribas’ branch in Hungary in 2012, and that of ING in 2006. CAPITAL OUTFLOW REVERSED The value of Hungarian offshore private deposits is estimated to reach HUF 2 tln following a significant capital outflow during the past two or three years. However, after traditional European private banking centers, such as Zürich
and Geneva, have significantly weakened, their clients can be lured away by local or other regional providers. Currently, Erste sees a massive net inflow of assets from abroad. “We can offer the services of our Vienna practice for those, who do not want to return their assets to Hungary,” said Kállay. Funds totaling HUF 19 bln were deposited on the Stability Savings Accounts, the no−questions−asked bank accounts meant to lure money out of off− shore accounts that were introduced in the first half of 2014. At first, the market saw the inflow of big offshore assets, however, the average amount dropped in the third quarter, said Kállay. The minimum amount to be deposited is HUF 5 mln. CHOOSING PROVIDERS There are pros and cons to banks’ private banking services and the services of alternative providers. Thus, it is no surprise that most private banking clients typically keep accounts at more than one provider. Unable to offer banking operations, cards, accounts, direct debit and deposits, alternative providers can compete with banks in only one area, namely investments, said Kállay. Private banking clients are mostly business owners and might like to keep all their banking activities at one provider. “At the same time, banks have to show strong performance in the basic competences, this is why we launched portfolio management services two years ago,” he stressed. “Most clients do not have time to manage their finances and they want
us to make the decisions for them at a certain risk level,” he added. Independent providers are, in turn, more flexible. Equilor is a Hungarian provider that has been present on the market for 25 years, said Nagy. “In addition, we do not have to worry about bad loans or making provisions, as we do not give out loans. Thus, customers’ assets, which are held on securities accounts, are in safer hands.” Alternative providers are Investor Protection Fund (BEVA) members. Private bankers at Equilor are continuously monitoring the market and discussing investment opportunities with their clients as soon as the market provides one. The staff makes sure that clients are fully aware of the potential risks and rewards. A NEW CONCEPT The market welcomed the introduction of the concept of trust into Hungarian law in March 2014. Under the new Civil Code, a trust is a means of transferring ownership of assets for a limited period. Market participants, while still waiting for the detailed rules, have started preparing their own structures. The target group for such services includes top managers and business owners, who aim to separate their private assets from those of their businesses. Nagy believes that it will take about 10−20 years to use trusts as a form of managing a family’s wealth, as seen in other countries. A trust is based on an agreement between the original owner and the settlor and the trustee for the efficient management of the assets.
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Budapest Business Journal | November 14 – November 27, 2014
Pension insurance is the new Tax benefits for pension insurance are giving a boost to the market, but growth in GDP, and general improvements in spending, are cheering members of the insurance industry. LEVENTE HÖRÖMPÖLI-TÓTH
Describing players of the domestic insurance market as relieved would definitely be an overstatement, but optimism is undeniably out there. The nightmare of the crisis has passed and 2013 saw an expansion of well over 5%. According to Attila Kasza, deputy CEO of K&H, the improving textbook indicators such as investments and employment contribute to the progress greatly. Increasing household net wages are bound have an equally positive impact. A lot of the good news seems to be coming from the tax breaks on ADVERTISEMENT
pension insurance, which is leading the charge, while other types of insurance are rising along with the general economic mood. The Q3 statistics are not available yet, but during the first two quarters the upward market trend sufficed for a 1.25% hike, a rate that makes experts cheer to different degrees. “In certain areas initial signs can already be seen that hint at economic recovery, which should affect the insurance market and customers’ willingness to save positively,” Péter Kisbenedek, President & CEO of market leader Allianz Hungária Zrt. told the Budapest Business Journal. Others strike a more cautious note when evaluating the situation. István Csonka, deputy CEO for sales and marketing at Groupama Garancia Biztosító Zrt. finds that even though the current business year has so far met optimistic expectations, GDP growth by itself does not have any substantial influence on the insurance market in the short−term. “In the long run, however, we are confident and we count on the fact that revenues would be dragged upwards as a result,” he told the BBJ.
Attila Bosnyák.
COMET IN THE SKY? Consequit Group CEO Attila Bosnyák sees no correlation between the performance of the economy and the promising developments in the insurance arena. He attributes the improved figures rather to tax incentives for pension insurance and the fact that awareness about private pension plans has started gaining ground. Indeed, households have
István Csonka.
been stabilizing their finances and tend to plan them more carefully. Low bank deposit interest rates also push them towards alternative financial instruments. Accordingly, the number of pension insurance contracts ballooned 20−fold in the first half of 2014, as stated by the data of MABISZ, the Association of Hungarian Insurance Companies. Like its competitors, Consequit is
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Budapest Business Journal | November 14 – November 27, 2014
work horse of the market sector is deemed as “underinsured”. Another field of special interest could well be agricultural insurance.
In certain areas initial signs can already be seen that hint at economic recovery, which should affect the insurance market and customers’ willingness to save positively. Zsolt Raveczky at a recent conference. Pension insurance makes up as much as 20% of the total life insurance volume in Austria; that ratio is projected to be achieved in Hungary by 2018.
Péter Kisbenedek.
counting on this trend continuing. “Our company is focusing on the pension insurance market and we wish to stay the course in 2015. Customer awareness should spread and we expect a growth−friendly environment supported by tax incentives,” Bosnyák explained. This is in line with what was stressed by Erste Biztosító’s expert
MORE AMMO IN STASH Although pension insurance is hailed in chorus, it cannot save the day single−handedly. Motor insurance has also shown advancements, in particular due to accelerating new car sales. And general liability insurance alone produced a 15% leap compared to 2013, the reasons for which lay in the amendment of the relevant sections of the Civil Code on company executives. “We had to come up with a scheme tailored to the rules of the new Code and market advantages and business opportunities
had to be detected that arouse as a result,” Kisbenedek noted. Demand in that segment is forecast to stay solid. Home insurance carries the promise of future growth as well. One good explanation for that is that the real estate market is finally reviving, and lending follows suit. On the other hand, there is a lot to make up for. “In the past 1−2 years, around 150,000 home insurance contracts have vanished from the market. That negative trend draws our attention to the fact that people need to be informed more precisely about the importance of such insurance and that they shouldn’t expect help from the government if their home suffers damage,” Csonka said. At Allianz, not only the home insurance market, but also the SME
DON’T FORGET THE LAWMAKER All these expectations may be turned upside down in no time though, should the lawmakers decide to make it happen. Tax plans are not yet finalized for next year and the rise and fall of the internet tax shows that things can change overnight. Therefore, market players are reluctant to comment prematurely. Their overall sentiment remains cautiously optimistic, though. “Tax law amendments will have a negative impact on corporate life insurance,” Bosnyák said. “But this is not a predominant segment, so that means a slightly declining tax environment.” Not surprisingly, what the entire industry most yearns for is predictability. “For our company a stable and predictable market environment is of utmost importance,” Csonka said. “We welcome every measure that increases the purchasing power of households, since they have a positive effect on consumption and they provide the opportunity for strengthening awareness about individual saving plans for future self−provision.”
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Survey: SMEs are better bank customers A survey finds that SMEs are doing more advanced planning, and taking advantage of state−subsidized loans, turning them into good customers for the retail banking sector. ZSÓFIA VÉGH
After years of pessimistic forecasts, small− and medium−sized firms in Hungary finally see reasons to be cheerful about the future. According to the findings of the GFK and CIB Bank survey, SMEs are becoming cautiously optimistic. The survey finds that SMEs are also beginning to make longer−term plans, and that there is a growing need for trustworthy bankers. Among the reasons for the uplift in mood, the introduction of the “Funding for Growth Scheme” (NHP) plays an important role. The program, whereby retail banks use central ADVERTISEMENT
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EXPERT OPINION
bank money to provide loans to small firms at a low annual interest of 2.5% or less, was introduced last August with two extensions since, the second announced only at the end of this October. The scheme has proven to be successful. Last year banks disbursed HUF 700 billion in the framework of NHP, while out of this year’s HUF 1 trillion, HUF 400 bln has been disbursed. Since the average amount of NHP loans is HUF 30 million, 20,000 new contracts could be sealed from the remaining HUF 600 bln, Bankmonitor reported. (Should this amount be taken up, MNB has said it would add another HUF 1 tln.) Eximbank’s refinancing credits are equally popular. Roughly eight of every ten contracts signed use one of the two state−backed products, Mágó noted. CIB’s market share of NHP is around 6−8%. Following last summer’s boom in currency conversion, clients have used the NHP loan to invest in development buying new technology, but financing current assets, accounts receivables and inventory purchases are frequent options too. Despite Eximbank’s credit line to boost exports, there is only a slight pick−up in the number of firms expanding. Retaining current market (88%) is a higher priority than exploring new ones (38%), the survey finds. Expansion to foreign markets is more a question of a partner – it is a new business tie that can really spur this process. The GKI survey also showed that ever more firms think long−term: There has been a 5% drop in the number of those who don’t devise a strategy at all. “The fact that more SMEs create a strategy suits us. Being their financing bank, we need to understand their future plans,” said László Mágó, regional director of CIB SME Division in western Hungary. A trend the expert has noticed lately is the need for a dedicated bank consultant and personalized advice. The representatives of the
bank therefore need to take so−called consultative sales training that teaches them some psychology and assertive skills. In addition to personal ties, stronger market position in a certain segment is necessary to earn clients’ trust. CIB’s goals for the next 2−3 years are to get into the top three players in the SME and leasing segments. CIB has had its own division for SMEs since 2010, and the bank is predicting that this is an area where its business will grow. “Many forecast more modest macroeconomic growth for the next years. Yet what I hear from clients – the volume of new investments or construction projects – paints a different scenario,” Mágó noted. This rise in conscious planning by SMEs is welcome, yet there is plenty of room to fine tune, especially given that 42% of the firms questioned still don’t look further ahead than a year, and a quarter of them don’t change or adjust strategy at all. The laxness in planning may have to do with SMEs’ notion of competitive edge, which most (69%) identify with product quality, and 57% with price. Half of the firms cited good relations and excellent workforce as a key component. Those surveyed value customer satisfaction and retention more (73%) than financial stability (57%) or increasing turnover. While most firms may be a bit laid− back about planning years ahead, the question of handing over leadership is planned well before the head of the firm steps down. The owner being the director is also rather widespread (64%), and a similar portion of firms (61%) are headed by the same leader for more than ten years. Since many domestic SMEs were founded around 1989, roughly two−thirds of CEOs wish to resign in the next five years. This year, 65% of those polled were contemplating their successor, compared to 54% in 2013. Although leaders’ children don’t always have the ability or desire to steer a company, 89% of CEOs plans to hand over power to a family member.
ABOUT THE SURVEY CIB launched the survey last year in order to better understand clients’ business goals and behavior, and make adjustments in its operations accordingly. The bank tried to cover the market as far as possible, asking 600 SMEs in a telephone interview about their strategy, business decision− making and future plans. The pool of SMEs questioned has an annual turnover of between HUF 100 mln and HUF 10 bln.
Get yourself connected to stay ahead of the competition BBJ STAFF
Evidence of technological change is all around us with mobile devices, wearable technologies, knickknacks made by 3D printers and sensors for building the Internet of Things (IoT). And the pace of technological advances has been quickening. Technology is changing not only the way we communicate, but also how we buy, sell, work, pay, search, learn and play. Whoever stays out misses out. Businesses are left with no option but to keep up with those changes to stay ahead of the competition. One of the three major trends both global and Hungarian CEOs expect will have major impact on their businesses is continuing rapid technological changes, according to PwC’s latest CEO Survey. As a new generation of customers want ever more accessible, portable, flexible and customised products and services, businesses are forced to approach IT in radically new ways. Smart business leaders are using technology not just to develop new products and services, but to create brand new business models. There are new opportunities for growth and innovation, but only for companies that are able to capitalise on these changes. We often see people walking down the street - and occasionally bumping into things - with eyes fixed on their smartphones. Others experience separation anxiety when they do not have their phones or tablets with them, even if for a couple of hours. Our new, personalised relationship with our mobile devices creates an opportunity for companies to connect with their customers through a device that they carry with them at all times. In addition, mobile devices have the ability to track presence, location, preferences, activities and even behaviour of their owners. For advertisers, this offers a great opportunity for unprecedented marketing results and new channels of revenue by enabling them to reach an interested consumer base. But first, they must understand the significant challenges in both technology and user acceptance and how these impact their advertising strategy. The rise of a networked society has redefined not only marketing strategies, but the workplace, too, which is becoming less and less place-specific. As a result, especially young, or young-at-heart, employees often prefer to work outside conventional offices. While hand-held devices are commonplace now, wearable technology is yet to change the global technological and cultural landscapes. These devices can be accessories, such as glasses, bracelets, rings, watches headbands, gloves or earrings. However, there are implanted devices, too, such as, for instance, micro-chips. Wearable technology is gaining the most ground in health care, wellness, fitness and beauty. Devices that monitor physical activity are popular among consumers, clinicians and, last but not least, insurers. Coupled with smart diagnostics systems, they could
Nick Kós, Country Managing Partner, PwC Hungary
completely change the way healthcare is delivered. As for manufacturing, thanks to the expansion of 3D printing, the possibility to create objects is becoming available to the general public, thus turning customers into producers. Certain kinds of 3D printers are available at affordable prices, some cost roughly the same as a computer or a mobile phone. But 3D printing is not only about being able to print our clothes, shoes and household objects in the near future. Researchers have been able to print replacement bones and are working on making a bioprinter to produce human micro-tissues for drug-testing to replace animal testing. The Internet of Things (IoT) is transforming everyday physical objects from refrigerators through parking spaces to televisions into a network of information accessed through the Internet. Based on the increasing number of sensors, which enable the IoT, it is expected to be a multi-trillion dollar industry in the near future. The IoT can help consumers by improving their decision-making capacity. For businesses, the Internet of Business Things (IoBT) helps to achieve enhanced process optimisation based on data collected from the business environment. Sensors, which can be added to people, places, processes and products to detect and measure changes in position, temperature and light, thus turning those into datagenerating “things”. According to a recent PwC survey, companies in Asian countries are most likely to invest in sensors, while only 8% of respondents from European companies said they plan to boost their investments in this field. Innovative Hungarian start-ups could and should try to get in early, as this sector has every chance to become the “next big thing’’. In our new survey, we ask CEOs how strategically important digital technologies are for their organisations. We also want to know what factors help their businesses get the most out of investments in digital technologies.
NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY
The fact that more SMEs create a strategy suits us. Being their financing bank, we need to understand their future plans.
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Bill would end private care in public hospitals State hospitals in Hungary will not be allowed to offer private services, under proposed legislation. The result will be a loss of business for the hospitals, and could lead to a loss of doctors too. ZSÓFIA VÉGH
The national health fund will not support private services, and public and private care must be separated, state secretary for health care Gábor Zombor announced at a health conference at the end of October. If the proposal he mentioned becomes law, it would bring an end to a small line of business which hospitals had developed: accepting private patients. The customers were often foreigners, and their business helped to finance ailing hospitals. The details of the proposed legislation are not clear, and government health officials could not be reached for comment. Zombor said the idea is in line ADVERTISEMENT
with the government’s planned health care reform, where services are provided on the basis of need, and funds are aimed at improving prevention programs expanded to address diseases that affect much of the population. The state secretary depicted a scenario in which, in parallel with public care, a purely private alternative is available for patients. Zombor said that the National Economy Ministry was working on an investment−boosting package that would grant allowances for private health care providers. Last week, at an international insurance conference of the Association of Hungarian Insurance Companies (MABISZ), Zombor said that privately funded investments that carry out procedures at their own risks could expect tax breaks and tender money from EU funds. Zombor was referring to a widespread practice where private clinics do smaller procedures but send their patients to state hospitals to undergo complex operations. Most private clinics are not equipped to perform the more complex procedures, nor are they sufficiently staffed: providing high−level patient safety on a permanent basis is expensive. Private care is present in almost every Hungarian hospital. Often the doctors of the hospital will hire a surgery or an operating room for their private practice
patients. Many hospitals go beyond that and establish a private wing within their own walls. The most frequently cited successful example of such a “public private partnership” is that of Uzsoki utcai Kórház, in Budapest’s 14th district. The hospital has a good reputation as one of the leading orthopedic institutes in the country with excellent staff surgeons and physicians. Private procedures done so far constitute around one−tenth of the 30,000 operations performed in the hospital a year. Two thirds of these are orthopedic. Costs are between HUF 1.5−2 million, and that includes the remuneration of doctors and the staff and the materials used. Uzsoki Kórház also charges a HUF 50,000 fee for patient management. Up to October, the private section’s profit was HUF 14 mln, while expenses accounted to HUF 88 mln, HVG reported. Though Uzsoki’s patients are mostly Hungarians, foreigners provide a constant user base for private facilities. At the Szent−Györgyi Albert Clinical Center’s private section in Szeged, only a tenth of the patients are local. There, private care generated HUF 100 mln in revenue the last three years, Hungarian economic weekly HVG wrote. Not only operations will be covered by the new legislation. Several hospitals receive paying customers undergoing employee medical exams or sports examinations.
These patients, too, use public facilities (though they probably queue less at the lab), but pay for every test. This system would also end under the proposed legislation. “In transparency terms, both patients and the management will benefit from the change,” said György Velkey, president of the Hungarian Hospital Association. “The downside, however, is that profit will not remain in the system.” Hospitals established this model in search of extra revenues and in response to growing demand for private services. Another advantage of the current practice is that it helps retain workforce. If paid a decent salary, doctors are less likely to work in a separate private clinic; they would much rather stay in their hospital. If the new legislation kicks in, hospitals will be cut off from an important revenue− making activity. Private clinics are likely to create competition to public hospitals, which can only be countered by increasing the funding of the latter, Vekey noted. This means raising doctors’ salaries and/or providing hospitals with extra support. Discussions between the hospital association president and the state secretary are ongoing, and Velkey said he is confident that there is room to incorporate the requests of hospitals. The legislation is, after all, at a very early stage, with the details yet to be worked out.
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Budapest Business Journal | November 14 – November 27, 2014
Insurance companies [1] Ranked by gross premium income
2
GENERALI-PROVIDENCIA BIZTOSÍTÓ ZRT.
3
GROUPAMA GARANCIA BIZTOSÍTÓ ZRT.
4
www.allianz.hu
www.generali.hu
17,248
TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR
ADDRESS PHONE FAX EMAIL
15.97
– Allianz New Europe Holding GmbH (100)
Péter Kisbenedek Gábor Bognár Anikó Lenkei
1087 Budapest, Könyves Kálmán körút 48–52. (1) 301-6565 (1) 301-6100 ugyfelszolgalat@ allianz.hu
97,065
56,737
8,287
13.58
– Generali PPF Holding B.V. (100)
0LKiO\ (UGŃV $QQD +HJHGŝV –
1066 Budapest, Teréz körút 42–44. (1) 301-7100 (1) 452-3505 generali@generali.hu
5,342
Yann Ménétrier Mihály Bácsfalvi István Csonka
1051 Budapest, Október 6. utca 20. (1) 373-7500 (1) 373-7549 info@ groupamagarancia.hu
www.groupamagarancia.hu
46,378
20,939
67,317
4,797
11.12
AEGON MAGYARORSZÁG ÁLTALÁNOS BIZTOSÍTÓ ZRT.
81,626 42,564
36,609
19,293
55,902
10,294
10.08
– AEGON Hungary Holding B.V. (50), AEGON Hungary Holding II B.V. (50)
Péter Zatykó Gyula Horváth –
1091 Budapest, hOOŃL ~W (1) 476-5765 (1) 476-5710 ugyfelszolgalat@aegon.hu
8.76
– ING Continental Europe Holdings B.V. (100)
Cornelia Coman – –
1068 Budapest, Dózsa György út 84/B (40) 464-464 (1) 267-9093 biztosito@ing.hu
Othmar Michl 6iQGRU .ŃV]HJL –
1134 Budapest, Róbert Károly körút 76–78. (1) 238-6000 (1) 238-6060 info@uniqa.hu
www.ing.hu
UNIQA BIZTOSÍTÓ ZRT.
7
39,489
56,236
OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN
– Groupama S.A. (100)
ING BIZTOSÍTÓ ZRT
6
110,034 59,909
40,829
MARKET SHARE IN 2013 (%)
90,054 48,464
www.aegon.hu
5
129,363 70,704
PRE-TAX PROFIT IN 2013 (HUF MLN) TOTAL
1
ALLIANZ HUNGARIA BIZTOSÍTÓ ZRT.
GROSS PREMIUM INCOME IN 2013 (HUF MLN) IN H1, 2014
NON-LIFE
COMPANY WEBSITE
LIFE
RANK
BREAKDOWN OF GROSS AMOUNT OF CLAIMS PAID IN 2013 (HUF MLN)
www.uniqa.hu
MAGYAR POSTA BIZTOSÍTÓ / MAGYAR POSTA ÉLETBIZTOSÍTÓ ZRT.
70,961 35,206
64,300
–
64,300
405
60,531 30,275
19,685
9,028
28,713
–1215
7.47
– Uniqa International Beteiligungs- Verwaltungs GmbH (99.93), UNIQA International AG (0.07)
58,188 40,339
36,055
2,960
39,015
903
7.18
Magyar Posta Zrt. (33.07) Talanx International AG (66.93)
Anett Pandurics Ferenc Pap Péter Mester
1022 Budapest, Bég utca 3–5. (1) 423-4200 (1) 423-4210 info@mpb.hu
4.19
– Vienna Insurance Group Wiener Städtische Versicherung AG (100)
Gábor Lehel – –
1082 Budapest, Baross utca 1. (1) 486-4200 (1) 486-4390 info@unionbiztosito.hu
Wim Guilliams – –
1851 Budapest, Lechner Ödön fasor 9. (1) 461-5200 (1) 461-5276 biztosito@kh.hu
www.postabiztosito.hu
8
UNION VIENNA INSURANCE GROUP BIZTOSÍTÓ ZRT. www.unionbiztosito.hu
K&H BIZTOSÍTÓ ZRT. 9
www.khdirektbiztositas.hu
METLIFE BIZTOSÍTÓ ZRT. 10
www.metlifehungary.hu
SIGNAL BIZTOSÍTÓ ZRT.
33,911 20,808
6,503
3,763
10,266
401
29,376 17,063
10,345
10,314
20,659
2,374
3.63
– KBC Insurance N.V. (100)
19,136 9,996
21,232
8,078
29,310
135
2.36
– MetLife EU Holding Company Ltd. (100)
János Bartók – –
1138 Budapest, 1pSI UGŃ XWFD (1) 391-1300 (1) 391-1660 info@metlife.hu
17,762 11,333
7,892
3,431
11,323
–54
2.19
– Signal IDUNA Allgemeine Versicherung AG (100)
Tamás Kálózdi Dénes Csata –
1123 Budapest, Alkotás utca 50. (40) 405-405 (1) 458-4260 info@signal.hu
2.06
Individuals (52.75), legal entities (42.41) –
Gabriella Kádár Miklós Barta –
1033 Budapest, Flórián tér 1. (1) 244-5858 (1) 247-2021 info@cig.eu
Zsolt Raveczky – Viktor Maják
1082 Budapest, Baross utca 1. (1) 484-1700 (1) 484-1799 info@erstebiztosito.hu
11
www.signal.hu
12
CIG PANNÓNIA ÉLETBIZTOSÍTÓ NYRT. www.cigpannonia.hu
16,715 5,793
13
ERSTE VIENNA INSURANCE GROUP BIZTOSÍTÓ ZRT.
15,800 6,480
6,249
–
6,249
530
1.95
UNION Vienna Insurance Group Biztosító Zrt (5), Erste Bank Hungary Zrt (5) Vienna Insurance Group (90)
12,248 5,784
10,775
295
11,070
–1264
1.51
– Vienna Insurance Group AG Wiener Versicherung Gruppe (100)
Anett Vadas-Földvári Beáta Pálinkás Csaba Bunghardt
1138 Budapest, Váci út 135–139. (1) 465-6565 (1) 413-5101 info.axa@axa.hu
1.10
– Grazer Wechselseitige Versicherung AG (100)
Andras Hochmann – –
7632 Pécs–Üszögpuszta, Kastély (1) 202-1211 (1) 355-5530 info@grawe.hu
www.erstebiztosito.hu
14
VIENNA LIFE BIZTOSÍTÓ ZRT.
15
GRAWE ÉLETBIZTOSÍTÓ ZRT.
www.axa.hu
www.grawe.hu/hu
8,874 3,753
6,873
4,372
–
–
6,873
4,372
NOTES: (1) Data from the database of Hungarian Financial Supervisory Authority-National Bank of Hungary.
534
1,548
BBJ
4 Socialite What the Mitiszol are you drinking? A tasting in Budapest showcases naturally produced wines. ROBERT SMYTH
The natural wine movement is as polarizing as it is exciting, and the “Mitiszol?” (literally “What are you drinking?”) tasting at the Akvárium Club on November 8 served up plenty of unique wines, many of them good to outstanding. Nevertheless, the odd twist of nature brought about a few highly unconventional turns to the flavors, which is indeed what can happen when nature is allowed to take its course. One white that had everything in the right place was Veltlinske Zelené 2013 from the Kasnyik cellar, which was made by ethnic Magyars in Strekov, just across the border in Slovakia and not far from Esztergom. This is made from the über trendy and top− notch grape variety known as Zöldveltelini in Hungary and Grüner Veltliner in Austria, from where it has achieved world fame. Incidentally, it comes from several different clones of the same grape planted alongside each other. This biodynamically made wine is already a deep straw color, suggesting a bit of time macerated on the skins, and is not the light green typical of the variety when made reductively. It has a rich, clean but hardly fragrant nose of pineapple, citrus fruit, lemon curd and the variety’s characteristic white pepper, with the same flavors continuing on the full, waxy, savory palate. While the alcohol is on the high side at 14%, it is well integrated thanks to the full−bodied, oily character of the wine. It also strikes an excellent balance between freshness and depth. WHY PAY FOR YEAST? Natural wines are rarely aromatic fruit bombs due to the use of the natural yeast present in the grape skins and in the cellar, as opposed to specially prepared cultured yeast often designed to enhance fruitiness. This tends to lead to more restrained aromas, although what you often get is a wine that is more balanced from start to finish. This was absolutely the case with the aforementioned wine, and it also had subtle elements of the grape variety and the savory character typical of the region. The elegant and complex Királyudvar Sec 2011 (Furmint with a hint of Hárslevelű) from Tokaj was the very opposite of a top heavy wine, i.e. all nose and no palate, and picked up intensity to deliver a veritable crescendo and long lasting finish. Furthermore, it is easy to argue, as many natural winemakers do, that wine made from natural yeast is more of an articulator of the wine region that it hails from, given that the yeast can be considered a key component of the terroir. This untranslatable French term, now banded
Scenes from the Mitiszol tasting.
There would appear to be an element of potluck with natural winemaking. about ten to the dozen when describing wine, refers to the various factors that determine the character of a wine such as the amount of rain, sun and wind, aspect of the slope, temperature, soil, grapes, the influence of the winemaker, and so on. SERVING UP SEDIMENT Perhaps the most extreme example of a natural wine from the Mitiszol fair was from the Strekov winery that hails from the town of the same name, which like Kasnyik is also a member of the region’s Autentista movement. Strekov’s Nigori 2013 came served with sediment shaken up, which tasted exactly as I expected sediment to taste; creamy but not in an altogether palate pleasing way. “Now that’s the taste of terroir,” quipped Strekov winemaker Zsolt Sütő. Another important aspect of natural winemaking is using minimal sulfur. Extended skin maceration can bring out natural sulfur that can serve to preserve the freshness of the wine. White wines made in this way take on an orangey−copper color and are often hence dubbed “orange
wines”. Strekov’s Olaszrizling Heion 2012, presumably a play on the Hungarian word “héjon” (literally “on the skins”), was kept on the skins for two weeks; most conventional white wines receive no or very little skin contact. It oozed apricot, marmalade and red grapefruit, while importantly remaining fresh and zesty with good acidity, followed by a slight bitter note on the finish. STRIPPING BACK ON SULFUR This feather light use of sulfur can be a risky strategy as the wine can start
re−fermenting, as was the case with one red, a 2012 Kékrankos from Sopron’s Péter Wetzer. It took the wine in a rather rustic, even barnyard−aroma direction. The winemaker himself shrugged and described it as a living product, which in this case was a bit too alive for my taste buds. There would appear to be an element of potluck with natural winemaking, and his other two reds were bang on the money. Wetzer Pinot Noir 2011 was very pure in terms of varietal character and although there are many subtle differences between Pinot Noirs,
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Budapest Business Journal | November 14 – November 27, 2014
a wine is either a Pinot or it isn’t, and this one very much is. It is made from one−third of whole bunch fermented grapes, which Wetzer says gives the wine better structure and more floral notes. The other red was the seriously impressive Spern Steiner 2011, from 60−year−old vines growing in the pure schist and quartz soils of Sopron’s most prized vineyard, next to Lake Fertő. The vineyard can no longer carry the Spern Steiner moniker due to some regulation that is too boring to go into here, but Wetzer will not be moved and continues to proudly use the old name on his label. “It’s been called Spern Steiner since 1682,” he asserts. Franz Weninger, an Austrian winemaker who makes wine on both sides of the border and is a member of Austria’s Respekt biodynamic organization, now calls his wine from the same vineyard simply Steiner. His Syrah 2012 dazzled with its violet and black pepper notes, which were reminiscent of the varietal benchmark Syrahs from the northern Rhône. Franz Rheinhard Weninger, to distinguish him from his dad Franz senior (who started the family winery in Sopron before handing over the cellar keys to his son), is a prime example of how a move in a more natural direction can change your wines to better capture the essence of the terroir. In Franz Rheinhard’s own words, he started off with the aim of making wines that could receive 100 points from esteemed U.S. wine critic Robert Parker, using state− of−the−art technology to ramp up the concentration to the max on the way. Great they were, but they could have been made anywhere. Some people wondered what on earth was going on with his wines as they became leaner, more edgy and earthy as he travelled down the long road to full biodynamic conversion. Now his wines are more medium−bodied than full but exude both remarkably pure flavors of the grapes that made them and subtle earthiness of the place of growth. Ironically, Parker is no fan of the natural wine movement. In fact, he’s downright hostile to it, observing in his predictions for 2014 that natural wine will be seen to be a fraud, since all great wine is made with the minimum of intervention anyway. Indeed, it is unfair to imply that if you’re not with the natural movement, then you are out to destroy nature and poisoning wine drinkers with a deadly cocktail of industrial chemicals in the process. For its part, the movement has hardly been very good at avoiding that message.
WHAT IS MITISZOL? Mitiszol? describes itself as Hungary’s first drinks festival showcasing beverages made according to the principles of respecting nature. In many cases this means organic or even biodynamic farming. The producers commit to using no additives and as little intervention and manipulation as possible during the making. The result is a drink, whether it is alcoholic or non−alcoholic, which not only tastes better, but also is healthier than its conventional counterparts, or so goes the mission statement. Well, I’m not sure that they always taste better; taste a bad natural wine and you won’t forget the experience in a hurry and be glad that sulfur and whatever else was discovered. However, when everything turns out for the best, the wines can be stunning and allow the winemakers to express the terroir they’ve been given to work with. The wider natural winemaking movement is taking the wine world by storm and in London, it’s broken up into two separate major events: the Raw Wine Fair and the Real Wine Fair. Isabelle Legeron MW (also known as “that crazy Frenchwoman”) founded the former and is a big fan of Eger’s Imre Kaló. He is indeed capable of delivering wines that make you sit up and take note, such as those from the unfashionable Léanyka grape. Via two weeks of macerating on the skins, he somehow gets it to deliver big, rich white Burgundy−like wines in lame vintages such as 2001 and 2005. EMERGING EGER WINERIES Fellow Eger producer Attila Pince is an upcoming cellar and its owner/ winemaker, Attila Vámos, is a great friend and neighbor of Imre Kaló in the village of Szomolya. Following the master’s mantle, he keeps the reds for a minimum of two months on their skins, such as with his very earthy, even mushroomy Pinot Noir. “This gives more taste, deeper flavors and the tannins from the skins are different to tannins from barrels,” he says. Also from Eger, organic Gajdos made an exciting wine from the Blauburger grape, whose main role in life has typically been to add color to Bikavér. It is bursting with a bizarre combination of ripe, primary red fruitiness, cherry, sour cherry and an animal character, which somehow kind of works and can be construed as complexity when alongside such abundant fruit. It also does much more than add color to
the Bikavér, making its presence felt in an acclaimed 2009 bottling. From Villány, the biodynamic German couple Wassmann dazzled with three wines (Portugieser, Kékfrankos, and Cabernet Franc) that all had the character of the grape varieties coming to the fore, but without that high alcohol and rough tannin that wines from the region have all too often become. The event provided perhaps the last chance for some to try the excellent Somló wines of Hollóvár’s Lajos Takács. The man who was famed for living a hermit’s existence on Somló ADVERTISEMENT
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Hill and was even considering switching off the electricity in a bid to make the most natural wine possible, has rented out his vineyards and moved back to his birthplace of Tokaj. While he is involved in a small project involving a vineyard plot with Tokaj vigneron Géza Lenkey, he is also looking to start making his own wines there. However, they will not be for available for commercial release. Although I didn’t get to taste it (there’s only so many you can sample before the flavors merge into one), some raved about Sopron maverick Ráspi’s Gneisz, which, as its name suggests, come from gneiss soil.
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Budapest Business Journal | November 14 – November 27, 2014
WHAT’S
ON STEREO MC’S November 14, A38 This English electronic hip−hop group hit the big leagues in the early ’90s with their chart−topper “Connected”. Founded by vocalist Rob Birch and DJ/producer Nick Hallam, the Stereo MC’s spent a great deal of their musical career crafting remixes for other performers such as U2, Madonna and Queen Latifah among others. www.a38.hu SAUSAGE FESTIVAL November 14−15, Hungarian Railway Museum Indulge in a bit of rather gory Hungarian culture at the Pig Slaughter and Sausage
Fun things to d o in Budapest for the nex t t wo weeks.
Festival. Not only can visitors watch a real pig killing, but they can also pick up local culinary specialties and handmade crafts at the farmers’ market. The on−site petting zoo features the live versions of indigenous Hungarian species and pig breeds. www.disznotoroskolbaszfesztival.hu REMBRANDT AND THE DUTCH “GOLDEN AGE” To February 15, Museum of Fine Arts This exhibit of 17th century Dutch painting features more than 170 works by 100 painters, 40 of which come from the museum’s own collection, while the remainder are on loan from a number of renowned international museums. A
Mihály Dresch.
handful of Dutch masterpieces have also been recreated as 3D tactile versions for the visually impaired. www.szepmuveszeti.hu MEDESKI, SCOFIELD, MARTIN & WOOD November 17, Palace of Arts The avant garde jazz stylings of John Medeski on keyboards, Billy Martin on drums, Chris Wood on bass guitar and frequent collaborator John Scofield on guitar can be characterized by tight grooves and controlled improvisations. The Budapest show will feature material from their brand new release. www.mupa.hu MOZART’S REQUIEM November 19, Budapest Italian Institute The National Philharmonic Orchestra will perform Mozart’s Requiem in memory of Italian conductor Giuseppe Patané under conducter Pier Giorgio Morandi with musical accompaniment by Klára Kolonits, Judit Németh, Falcier Matteo, Zoltán Nagy and the National Choir. www.iicbudapest.esteri.it THE METROPOLITAN OPERA AT THE PALACE OF ARTS November 22, Palace of Arts Rossini’s opera “The Barber of Seville”, based on the French comedy of the same
Stereo MC’s.
name, has maintained its popularity since its first staging in Rome in 1816. It will be presented live in glorious HD at Budapest’s Palace of Arts and features performances by Lawrence Brownlee, Isabel Leonard, and Christopher Maltman, backed by the Metropolitan Opera Choir and Orchestra under conductor Michele Mariotti. www.mupa.hu THE PIANO GUYS November 25, Papp László Budapest Sportaréna American pianist Jon Schmidt and cellist Steven Sharp Nelson and their band became an internet sensation when their highly original, own−made music videos started receiving several million hits on YouTube. Their signature mix of classical and pop mashups have garnered them a huge following. www.budapestarena.hu VILÁGRASZÓLÓ FESTIVAL November 28−30, Palace of Arts The music of the cimbalom and the tárogató (Turkish pipe) are celebrated during this three−day festival with a series of concerts and workshops. Kálmán Balogh, Miklós Lukács, and many others will perform traditional and not so traditional numbers on these beloved instruments, while Mihály Dresch will demonstrate his own creation, the Fuhun. www.mupa.hu
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Budapest Business Journal | November 14 – November 27, 2014
Restaurants FINE
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This is an extract from Fine Restaurants, the Budapest Business Journal’s Restaurant Guide 2014 (www.facebook.com/fine. restaurants). To order your copy of the publication, which costs HUF 2,990, send an email including contact details to Andrea Bognár, bognar.a@amedia.hu
Locavore Locally Sourced Restaurant Diners visiting us will receive more than a simple lunch or dinner. Our customers will partake in a sophisticated and refined culinary experience. Here they can re−interpret everything they have ever thought about Hungarian cuisine. While the charismatic chef, István Halász, works his magic to put carefully and tastefully made meals on the table, we will gladly reveal how we began to test the boundaries of each traditional dish or which foreign cuisine inspired us in doing so; when we felt we had to adjust a uniquely Hungarian dish of taboo status and how we made these lighter and healthier.
WHAT IS LOCAVORE? Locavore is a change in approach. We aim to use as many raw ingredients grown by local farmers as possible in our kitchen. We require our vegetables to be fresh, tender and seasonal. The goal is to avoid eating fruit transported from remote locations and treated with who knows what chemicals. In doing this, we are not just doing a favor to our own bodies; we are also decreasing the burden on the environment inherent in making food. Locavore is a well−known concept in the United States. Here in Hungary, we are the first to represent the locavore approach in also including it in our name.
Address of restaurant: 1016 Budapest, Naphegy utca 67. · Telephone number For Reservations: +36 (1) 799−0401 · E−mail address: info@locavore.hu · Website address: www.locavore.hu · Name of manager: István Sram · Name of chef: István Halász · Opening hours: Monday−Friday: 07:30–23:00, 11:00–23:00, Saturday: 11:00–23:00 · Type of cuisine: Contemporary bistro kitchen · Number of seating places: 90+terrace · Year of establishment: 2013 ADVERTISEMENT
CRAFTING CHOCOLATE AT SZAMOS Famous for their marzipan decorations and beautiful cream-filled bonbons, the confectioners and chocolatiers at Szamos share their trade secrets through a deliciously diverse series of chocolate-making courses held almost every day leading up to Christmas.
A
final product. “Only trained chefs, confectioners and chocolatiers teach the courses and some have been in the profession for as many as 20 years,” Töröcsik adds.
rm yourself with the skills to produce the most original edible gifts, just in time for the holiday season. The renowned Hungarian cake shop chain, Szamos, now offers chocolate-making courses that range from the manufacture of truffles, bonbons and chocolate bars to team-building sessions. Also in the series are courses for kids, marzipan cake decorating techniques and the creation of popular Hungarian and French confections.
Szamos also offers team-building courses, in which up to 50 participants can take part in groups of smaller teams. The focus here is less about learning the tricks of the trade and more about working collectively with your colleagues, as any good team building session should facilitate. Individual time slots can be booked for these sessions, which are held in English or Hungarian at the participants’ request.
Founder and master confectioner Mátyás Szamos built his sweets empire from scratch and the business, which now comprises more than two dozen cake and chocolate shops is run by his daughter and her husband. Although Szamos came to fame as a producer of intricate marzipan decorations, since the opening of the cake shop on Párizsi utca in the late ’80s, hand-made chocolates have become a part of their repertoire. “The role of the school is to let people know that we produce more than just marzipan, that there is plenty of chocolate here as well,” the Director of Szamos Chocolate School, Ágnes Töröcsik says.
Most pre-Christmas classes are already full but for course availability and to book a session visit www.csokoladeiskola.hu.
During the three-hour courses, participants can learn from the pros how to produce mouth-watering bonbons and truffles and the like. “Courses are offered for no more than five participants, that way everyone can get hands-on experience in preparing
sweets. The group is small enough that the chocolatier can spend time with each student individually,” Töröcsik explains. The techniques being taught include tempering and pouring chocolate into molds, creating liquor-infused marzipan and cream fillings and decorating the
Private English-speaking instruction is available on request and all courses are held at the Szamos Gourmet Ház, 1052 Budapest, Váci street 1.
1052 Budapest, Váci street 1. Phone: +36 30 570 5973 www.szamosmarcipan.hu www.csokoladeiskola.hu www.facebook.com/SzamosGourmetHaz
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