Hungarian government-owned commercial lender Budapest Bank, MKB Bank and savings group Takarekbank (MTB) have entered into a merger agreement.

The consolidation of the three businesses will form the second-largest banking group in Hungary.

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The combination continues the overhaul of the banking system under prime minister Viktor Orban, who is keen to put more of the industry in local hands. The three banks first announced the strategic alliance back in May 2020.

Under the agreement, the government will own a 30.35% stake in the newly merged entity. MKB Bank’s owners are expected to own a 31.96% and MTB will hold a 37.69% stake in the combined company.

The new banking group will be valued at more than HUF740bn ($2.35bn).

The Hungarian government had bought Budapest Bank from General Electric (GE) for $700m, back in 2015. Since then, the government is looking for a buyer.

As the lenders agreed to a three-way merger, the state government’s ownership in Budapest Bank will cease to exist.

MKB, on the other hand, exited the restructuring process in the European Union (EU) at the end of last year.

As a result, the bank – which mainly focuses on corporate and private banking – was banned from acquisitions by the EU, which also limited the size of its balance sheet.

The formation of the new group awaits the approval of the Central Bank of Hungary (MNB).

The largest bank in Hungary is OTP Bank, which is also the largest independent lender in Central Europe.

OTP has purchased several of Societe Generale’s businesses, including that in Bulgaria and Serbia.