Hungary-based MKB Bank and savings and loans group Magyar Takarekszovetkezeti Bank (MTB) has inked a letter of intent to establish a joint holding company in the country, Reuters reported.

The new holding company is expected to become the second-largest banking group in Hungary.

The new venture will be called Magyar Bankholding Zrt, and each lender will own a 50% stake in the new company, the report added.

Both the lenders are expected to submit an application to form the new holding company to National Bank of Hungary (NBH) later this month.

On a successful establishment, the joint holding company will have a customer base of 1.3 million people, 840 branches, and HUF4.3trn ($13.13bn) in total assets.

The proposed venture, according to Reuters, will compete with OTP Bank, the largest lender in Hungary with HUF14.6trn ($44.63bn) in total assets.

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MKB mainly focusses on providing private and corporate banking services to its customers, while MTB has a large network of branches in rural areas.

MTB intends to become a full-service universal bank to improve its operational efficiency and reduce costs.

MTB Chairman Jozsef Vida said: “In the coming months, we will need to decide how our clients will benefit the most.

“A decision about the final form of co-operation would be made at a later stage.”