Austria`s Erste Bank buys majority stake in Prestige Bank

18:07, 01 August 2006
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Marking the continued expansion

Austria`s Erste Bank has agreed to acquire a majority holding in Ukraine`s Prestige Bank, marking the continued expansion of European banking groups into the promising Ukrainian market, according to an article by Roman Olearchyk in Kiev, Financial Times.

Erste paid Euro 27.7m ($35m) for a 50.5 per cent stake and pledged to invest Euro117m over the next four years to support the development of Prestige, a small Ukrainian bank established in December 2005 by a group of businessmen who sold their controlling stake in one of the country`s largest banks, Aval ank, to Austria`s Raiffeisen Banking Group for $1bn.

The acquisition agreement gives Erste the option of buying out the rest of Prestige, which plans to open more than 25 branch offices throughout Ukraine this year. Erste hopes Prestige will capture a solid share of Ukraine`s banking market, which has grown strongly in recent years.

Total sector assets increased by 19 per cent in the first half of this year, driven by private household demand for credit. Total credit volume during this period surged by 47 per cent, Erste said in statement.

Ukraine`s banking industry remains largely controlled by local business groups, but the presence of European banks has surged in the past year as the country has come onto investors` radar screens after adopting a western integration strategy following the Orange Revolution of 2004.

Raiffeisen`s purchase of Aval, which operates a countrywide network of more than 1,400 outlets, preceded a series of acquisitions in Ukraine by European banking groups that took their market share from below 10 per cent to more than a quarter.

 

In February, Italy`s Banca Intesa inked an agreement to purchase a controlling stake in Ukrsotsbank, one of Ukraine`s largest banks with $1.3bn in total assets, for $1.16bn.

Two months earlier, France`s BNP Paribas acquired a 51 per cent stake in another large Ukrainian bank, Ukrssibank, for about half a billion dollars.

Earlier this year, Hungary`s OTP Bank jumped into the Ukrainian market, agreeing to pay $650m for a bank Raiffeisen operated in Ukraine previous to its acquisition of Aval.

Sources said OTP is seeking to increase its presence in Ukraine, a country with a population of more than 47m, and has held negotiations on the acquisition of another Ukrainian bank.

In March, France`s Crйdit Agricole agreed to pay $254m for a 98 per cent stake in Index Bank, ranked 21st by net assets out of more than 150 Ukrainian banks.

On July 18, Eurobank, the second largest Greek bank, announced its acquisition of a 99.34 per cent stake in Universal Bank, Ukraine`s 72nd-largest bank by assets.                  

The news was monitored by The Action Ukraine Report (AUR) Monitoring Service, Morgan Williams, Editor.

 

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