Following an attempt of buying another Ukrainian bank, Italy’s Intesa Sanpaolo closed a Feb. 4 deal to buy a 100% stake in Ukraine’s 6th-largest bank, Pravex Bank, for over 500 million euros ($750 million). The acquisition of Pravex by Italy’s 2nd-largest bank is the latest advance by European banking groups into Ukraine, as foreign banks have increased their market share in the past 3 yrs.
As with the other acquisitions, the Intesa Sanpaolo purchase gives its new owner a share in Ukraine’s relatively small, but fast-growing emerging market. “With this acquisition, the Intesa Sanpaolo Group continues implementing its strategy of selective expansion in central and southeastern Europe (CSEE) and the Mediterranean basin,” Intesa said in a Feb. 4 statement. Through local retail and commercial subsidiaries, Intesa is already represented in 12 CSEE and Mediterranean countries, serving about 7.2 million customers.
Pravex Bank was sold by Kyiv Mayor Leonid Chernovetskiy and his direct relatives. It is a commercial bank dedicated to retail banking and serving SME’s and household clients. Pravex network includes about 560 branches throughout Ukraine.
Intesa’s purchase also marks the third significant cross-border merger and acquisition (M&A) deal struck so far in 2008.
The three deals give Ukraine an early 2008 boost in foreign direct investment (FDI), which now has reached? $3.5 bil, which is almost half of total FDI accumulated last year. Experts of the ING Bank forecast at least $9 billion in FDI in Ukraine in 2008. “The former Pravex Bank owners may bring their funds into the country to invest in new projects, and the new owners will seek to develop their companies further by investing additional capital,” an ING Bank statement said.
A previous deal in which Intesa attempted to buy a larger bank in Ukraine, Ukrsotsbank, failed in early 2007. At the same time, Intesa’s main rival in Italy, UniCredit Bank, moved swiftly to snap up Ukrsotsbank, ranked as one of Ukraine’s top five banks. UniCredit’s $2.2 billion deal of acquiring Ukrsotsbank was done on Jan. 23.
Competition between foreign banks for a slice of the Ukrainian banking industry is fierce, experts said, with several large, influential European banks vying for the same assets simultaneously. The next Ukrainian bank likely to be sold is Kreditprombank, ranked 13th by net assets. Investment banks in Kyiv claim that Kreditprombank is being targeted by France’s Societe Generale, and two Greek banks, National Bank of Greece and Piraeus.
Societe Generale was considered as the leading bidder for Kreditprombank, but the financial scandal in France could cause the group to postpone.
The high prices paid in recent cross-border bank acquisitions give a serious motivation to other big retail banks such as Rodovid, Ukrgazbank, and Megabank to follow the example.