Sándor Csányi, banker to Hungary’s oligarchs

May 26, 2016


The Hungarian state is actively assembling a new class of national bourgeoisie and elites — the latter are referred to as “nemzeti tőkések” (Hungarian for the Hungarians with capital). Aside from crafting and shaping the legal and regulatory environment to cater to the needs of the nemzeti tőkések, the state also channels enormous monies to this class through public procurements and/or lucrative contracts with the state. But the nemzeti tőkések also need credit. Lots of it.

The following was taken from an article published in 444.hu.

As so clearly demonstrated by the scandals involving Hungary’s state-owned export bank, Eximbank, where the state’s assets were used to finance film commissioner Andy Vajna’s purchase (and the operational costs) of TV2, the state will even provide credit for the nemzeti tőkések to expand and grow.

The methods for doing this may vary from, say, Eximbank financing the domestic business ventures of Vajna and István Garancsi, to the National Bank’s foundations putting their cash and investments into a bank owned by central bank governor György Matolcsy’s cousin, Tamás Szemerey. It turns out that the bank owned by Szemerey, Növekedési Hitel Bank (NHB), also received cheap loans through the National Bank’s “Funding for Growth” scheme. NHB used these funds to finance Szemerey’s other businesses, as well as the businesses of family friends.

According to 444.hu, this new class of national elites is now counting on yet another source for capital, the private sector’s OTP Bank led by Sándor Csányi.

Take Lőrinc Mészáros, the nation’s pipe-fitter turned billionaire oligarch. Mészáros’ meteoric rise from rags to riches under the Orbán government should be a case study for success at the Harvard Business School. While it’s entirely possible that Mészáros is serving as a frontman for someone else, his companies’ corporate records do not lie — the companies are owned on paper by Lőrinc Mészáros.

But as 444.hu points out, “it’s no surprise that others want to be part of this success story. Unfortunately, the average Hungarian is locked out of this economic miracle. People can’t go to the Budapest Stock Exchange to buy Mészáros stocks and become co-owners of this success. But there is one capital market player that has been successful in carving out a role for itself in this story, OTP.”

Mészáros’ companies have had no problems being awarded lucrative state construction contracts, which just happens to be one of the most corrupt sectors in the country. But he has other companies that have been just as successful in other fields beyond construction, such as in the heavily subsidized sectors of agriculture and livestock, and also (through proxies for now) the hotel business.

Because the sky-rocket dividends generated by his companies are paid out at year’s end, funding his business activities requires a great deal of financing. And by leveraging his companies’ assets in one sector, he can finance his activities in another.

444 reports that, according to publicly-accessible data, OTP Bank alone has provided more than HUF 10.9 billion in financing to companies directly linked to Mészáros between September 2014 and April 2016.

In this respect, one could say that OTP CEO Sándor Csányi is actually Mészáros’ banker.

It is also worthwhile to point out that Csányi himself has extensive business interests in Hungary’s agriculture and livestock sector. So extensive, in fact, that his business interests in agriculture span virtually every aspect of the sector, which makes him Mészáros’ largest and most efficient competitor.

According to 444, not only has Csányi become Hungary’s largest agriculture magnate in recent years, he’s done so in such an effective manner that he virtually no serious competitors in certain sections.

In 2013, Csányi liquidated an enormous portion of his shares in OTP to jump into agriculture. He is building a HUF 15 billion slaughterhouse in Mohács that will likely make him one of the country’s largest meat industry investors. This, too, is one area in which Mészáros is dabbling. Aside from already owning the Bakonyhús Kft. pig farm, rumors have circulated that Mészáros would buy the belly-up Papa Hús meat processing company.

444 writes that at the rate Mészáros is expanding, there is bound to be friction between his business ventures and those of Csányi.

And this is where 444 asks what will happen if Csányi and Mészáros are forced to compete more heavily with each other in the agriculture sector? Would this be the beginning of a Csányi-Mészáros agriculture co-operation, the well-oiled co-operation of large estates? Would Csányi try to ease the prime minister’s circle’s insatiable appetite for business? Would Csányi try to make himself indispensable?

Fidesz oligarch István Garancsi became a household name in the post-Simicska era, after Orbán fell out with his oligarch mate. With interests in construction, soccer, natural gas trading and banking, Garancsi’s activities are also financed by OTP. For example, Garancsi’s construction company, Market Építő Zrt., is being financed by OTP to the tune of HUF 4 billion.

Market Építő Zrt. was given HUF 2.5 billion to build Csányi’s Mohács slaughterhouse. The other HUF 1.5 billion from OTP is being used to finance the Párisi udvar construction project in Budapest. While it is true that Market Építő Zrt.’s operations are being financed by other banks, too, the OTP loans were made after Garancsi took over the company.

According to 444, Garancsi has until now served in one capacity or another in scores of companies, so it’s very difficult to figure out what he is up to. But OTP is financing even his agriculture (and other real estate development interests).

There is also the Sánta father-son duo: János József Sánta, the elder, and his son János István Sánta. According to some, the two are on quite good terms with Minister Overseeing the Office of the Prime Minister János Lázár.

Lázár, like the Sántas, is a native of Hódmezővásárhely — the southern Hungary town that Lázár represents in parliament.

The elder Sánta has extensive interests in the tobacco sector, while the younger runs the businesses. The Sántas were launched onto the main stage of national politics when ruling party Fidesz adopted the controversial (and unlawful) tobacco concession law that stripped convenience stores of their right to sell tobacco products and allowed the state ultimately to decide who can engage in the sale of tobacco products. The law was pretty much written in a way that very heavily favored the Sánta family business, Continental. People tied to the company were quite successful when it came to being awarded the tobacco retailing concessions.

Later, when the Ministry of National Economy decided to implement added taxes on the tobacco sector, the impost seemed to affect all market players but Continental. Recently, Continental took over Hungary’s tobacco wholesaling when the government took over that, too. Since then, the Sántas acquired a stake in Hungarian pro-government daily Napi Gazdaság and rebranded it as the pro-government Magyar Idők.

In October 2014, OTP provided financing for the Sánta family businesses of Continental Dohányipari Zrt. and Tabán Trafik for HUF 5 billion apiece. In autum 2014, Sánta businesses got around HUF 11 billion in financing from OTP.

By 2014, a public name-calling feud between Lázár and Csányi seemed to die down and completely dissipated by 2015. Meanwhile, in the background, the OTP CEO was financing Lázár’s business hinterland.

According to 444, based on OTP 2014 year-end balance sheets, the bank then had a market share in Hungary of around 31 percent. After 2010, the Orbán government set out to create a domestic competitor to challenge OTP. One such attempt was the creation of the FHB-Takarék-Posta-MFB integration (where the government nationalized the savings cooperative sector and played it out to FHB Bank), but this attempt has not been successful thus far.

But Csányi’s bank has been able to hold its ground in recent years. OTP has taken hits from the sectoral taxes on banks but has been able to lobby for special treatment to offset its losses in Ukraine and Russia.

There has not really been any news of friction between the government and Csányi as of late, and Csányi’s public criticism of the government has also died down.

According to 444, OTP Group’s consolidated financial statements at the end of 2015 show the bank has financed small- to medium-sized businesses in Hungary to the tune of HUF 1.804 trillion. The overwhelming majority of this lending took place in earlier years, but it’s still difficult to ascertain just how much went to the likes of Mészáros, Garancsi and Santa — though it’s certainly at least HUF 26 billion.

What is certain is that Hungary’s biggest bank has tied its own future to that of the government’s economic elite.