The Deutsche Bank’s target clients in Ukraine will include local branches of multinational companies,  German and European SME’s, as well as Central and Eastern European corporate clients. The Global Transaction Banking will be the main business of the bank and will comprise of cash management, trade finance and forex management. In the coming years, Deutsche Bank also plans to launch investment banking activities in Ukraine.

To mark the opening of Deutsche Bank DBU, J?rgen Fitschen, member of Deutsche Bank’s Management Board said: “As part of our strategic positioning, our subsidiary in Ukraine will strengthen us even more as the ideal banking platform for our clients’ investments, operations and market presence in Central and Eastern Europe. We believe there are opportunities for growth in the Ukraine , and in the entire region, and are therefore strengthening our network in the region.”

The Deutsche Bank DBU subsidiary will be directed by Konstantin Seryogin (39), who was already head of Deutsche Bank’s Ukrainian representative office.  The new subsidiary is being launched with 20 staff members and equity capital of roughly EUR 22 million (UAH 240 million (hrynvia)). By the end of the year 2009, 30 employees should be working in the Ukraine , expanding to approximately 50 by 2012. In addition, Deutsche Bank staff delivers investment banking and transaction services to Ukrainian clients from the bank’s Frankfurt, London and New York offices.

ING Group NV will cut its geographical spread in an attempt to refocus its business and boost capital, according to a speech being presented Thursday by Chief Executive-designate Jan Hommen at the Dutch financial firm’s annual investor day. ING Bank will be focused on Europe, he said, including retail banking in the Benelux and Central Europe. Banking operations in Ukraine will be unwound.

Benelux Business News

The buyers of the frozen deposits, although they cannot withdraw the money, can use the full value of the deposits to cover the value of loans issued by the banks for home, car and land purchases on which customers have defaulted, and thereby take possession of the repossessed property.

Currently the discounts on buying a frozen deposit are in the range 10-34%.

The majority of traded deposits and credits are distributed between those Ukrainian banks when Temporary Administration of the National Bank of Ukraine has been appointed: Nadra Bank, UkrPromBank, Bank Kiev etc.

The press office of the Volksbank has confirmed the Group’s intention to acquire another Ukrainian asset. The investment amount has not been revealed though. The VBI’s representatives stressed out that following the world financial crisis erupted last summer, prices for financial institutions in Central and Eastern Europe have stabilized.

The Volksbannk International Group acquired the Western Ukrainian Elektronbank for EUR 57 million in the beginning of 2007. And, to continue expansion in the Ukrainian market, the Group is now looking for a financial institution which would balance out the geographic representation of the Group in the industrial central and eastern regions of Ukraine.

Volksbank International Group have other assets outside Austria. It controls ten banks in Central and Eastern Europe including two in Bosnia, Hungary, Romanian, Serbia, Slovakia, Slovenia, Czech Republic, Croatia and Ukraine. The Group’s assets by 2006 results were EUR 6.7 billion. In November 2007 VBI had 524 branches and over 5 thousand employees with the balance amount reaching EUR 9.9 billion.

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.

The price paid was a record amount for a Ukrainian bank. The deal is also the most recent in a wave of acquisitions in which European banking groups have paid top dollar to acquire a position in the small but fast growing bank sector in Ukraine.

???The USB acquisition reinforces UniCredit Group??™s operations in Ukraine, one of the fastest growing economies in the region,??? UniCredit Group spokeswoman Francesca Palermo-Patera said.

UniCredit Group ranks among the top financial groups in Europe, with a market capitalization of about 70 billion euros and assets totalling about 1 billion euros. UniCredit Group has in recent years moved to increase its presence on the Ukrainian market launching bank offices under the UniCredit brand.

USB was established in 1990 and ranked as Ukraine??™s fourth largest bank in assets after Privat, Raiffeisen Bank Aval, and UkrSibbank in December 2007, according to the Association of Banks of Ukraine.

USB??™s assets are estimated at 4.2 billion euros. Under UniCredit, the bank will diversify into asset management, financial consulting and pension funds, a UniCredit spokesperson said. With its low banking penetration, Ukraine is well-positioned for sustained strong mid-term asset growth, particularly in retail, Palermo-Patera said.

Low competition and huge growth opportunity will attract more investors in the next several years, Pronin said.

Ukraine still lags behind most central and eastern European countries in terms of penetration per capita, with retail lending in September at just 368 euros per capita, compared with 1,158 euros per capita in Poland, Palermo-Patera added.

???Combined with the low competition markers, it has a considerable potential for banking industry newcomers,??? Pronin added.

Since 2004, Ukraine??™s banks underwent 20 merger and acquisition (M&A) deals worth more than 4.7 billion euros, according to Pronin. Other international players considering the Ukrainian market include General Electric Money (US), Santander (Spain), Intesa Sanpaolo (Italy), the National Bank of Greece, Alpha Bank (Greece), and Nordea (Sweden), which are expected to come to Ukraine during the next two years. Leading domestic banks that have yet to be sold but are particularly attractive buys include Ukrprombank, Kreditprombank and Pravex-Bank (now sold to Inesa)

Through a series of merger and acquisition (M&A) deals launched in 2005, European banking groups bought some of Ukraine??™s most prized banks for top dollar.

And while Ukraine??™s banking industry awaits a second wave of M&As, the new international players are briskly competing with their Ukrainian counterparts, increasing competition and quality of service, experts said.

Competition also caused credit rates to decline, said Viktor Guroma, head of financial assessments at the fast-growing Deltabank, established in Kyiv in 2006.

???The entrance of international banks into Ukraine has brought lower credit rates, new products and procedures, and the banking system??™s improved transparency,??? Guroma said.

Austria??™s Raiffeisen Bank kicked off the spree in 2005, paying about $1 billion for Aval Bank, one of Ukraine??™s largest banks. The price paid shocked many bankers at the time, but it remains a bargain compared to the prices paid for smaller banks in the following years.

France??™s PNB Paribas, Italy??™s UniCredit Group, Germany??™s Commerzbank and Sweden??™s Swedbank are among a handful of European banks that marched into Ukraine paying between $500 million and $2 billion for a share of the small but fast-growing market.

Only in the last two-and-a-half years, the value of M&A deals in Ukraine??™s banking sector totaled about $7 billion, according to Vitaly Strukov, managing director and head of investment banking at Concorde Capital, a full-service Kyiv-based investment bank.

During these years, banks with foreign capital increased dramatically as their presence on the market rose from below 10 percent to about 30 percent, in terms of net assets.

Experts said more M&A activity is ahead, predicting that foreign banking groups could capture about 50 percent of the market share in coming years.

So far, the competition has reduced loan interest rates by about 2 to 3 percent in recent years.

Competition has brought many other improvements. Longer loans have enabled Ukrainians to extend mortgages from a maximum of 10 years before 2005, to between 25 and 30 years nowadays.

Corporate clients also have benefited with access to cheaper loans, Strukov said. Before 2005, an average company could at best expect an annual rate of 12 to 15 percent. Now rates of 8 to 11 percent are common.

M&A deals and foreign investment brought new services and products that were previously poorly developed, or non-existent. As an example, analysts cited the emergence of Internet banking, giving clients the opportunity to use and pay for banking services much faster.

The presence of international players will continue to gradually bring down interest rates and offer new competitive services to Ukrainian clients.

Backed by financial muscle and better access to credit from their parent groups abroad, the foreigners can afford to offer lower rates because Western banks, thanks to their high international ratings, can borrow at rates 5 to 6 percent lower, according to Strukov.

Due to their low credit ratings, even the largest Ukrainian banks can borrow at interest rates of 10 to 11 percent on average, though some have struck better deals, he said.

However, loans offered by international players will only be slightly cheaper than those offered by Ukrainian banks, because internationally owned Ukrainian banks need to recover the costs spent on the purchase of their Ukraine bank operations, while producing profit for shareholders, experts said.

That??™s why the difference between credit rates offered by foreign investors and large Ukrainian domestic banks will remain small in the near future, about 0.5 to 1.0 percent, Strukov said.

Looking ahead, industry insiders expect more M&A activity, though smaller in size. After all, more than 150 banks operate in Ukraine, many of which are too small to compete nationally.

About 70 percent of the whole market is controlled by the top 20 banks, according to Guroma.

The tendency towards consolidation will remain strong for another five years. Many so-called pocket banks, which have in the past served as private banks for the business group owning them, will be sold off to foreign banks, or will merge together with other regional banks after which they will be sold off to foreign bidders, he said.

The growth potential is strong in Ukraine, a country with about 46 million citizens who are only beginning to make use of classic banking services.

According to Guroma, 46 percent of Ukrainians make use of banking services today. Of this, each uses less than two bank products, while in Europe clients typically make active use of at least four bank products.

Source: KyivPost