Southeast Europe’s banking sector gets new investor geography

Southeast Europe’s banking sector gets new investor geography
Hungary's OTP has been on an acquisition spree across Southeast Europe.
By Clare Nuttall in Glasgow May 30, 2019

The ownership profile of Southeast Europe’s banks has changed significantly since the international economic and financial crisis of 10 years ago. 

Banks from the crisis-hit Greek banking sector, which previously had a strong presence in the Balkans, are withdrawing from international markets as part of the sector bailout, while other banks that had expanded pre-crisis were also left reevaluating their presence especially in small, non-core markets. 

Others, however, are looking to expand into Europe’s southeast frontier, and none more aggressively than Hungary’s OTP. 

The bank’s chairman-CEO Sandor Csanyi outlined OTP’s future plans at its AGM in April, saying the ongoing acquisition spree will continue as it aims to acquire three more banks in the region, after which it will take a break to digest its new assets. 

Hungary’s largest lender has already taken over subsidiaries of French lender Societe General in Bulgaria, Albania, Serbia, Moldova and Montenegro, bringing the number of foreign units to 11. By the end of 2019, it will be present in 12 countries, if it manages to close a deal in Slovenia.

OTP is also understood to be looking for new acquisitions in Croatia, where it is interested in buying Croatia's seventh largest bank Addiko or the local unit of Raiffeisen, Croatian daily Jutarnji List reported in April. 

However, OTP has so far failed to progress in Romania, which has Southeast Europe’s largest population including a substantial Hungarian minority, and where many Hungarian businesses operate. It was on the verge of acquiring National Bank of Greece’s (NBG’s) Banca Romaneasca before being blocked by the local central bank

Instead, Romanian state-owned lender Eximbank seems to be the most likely buyer of Banca Romaneasca, going against the tendency to privatise state banks in most of the region. 

This in contrast to other parts of Eastern Europe, where there has been a move towards greater state ownership in the banking sector, wrote Gunter Deuber of Raiffeisen Research in Vienna in a comment for bne IntelliNews in 2018.

Elsewhere in the region, Greek banks are continuing to look for buyers for their local operations. Albania saw the sale of NBG Albania to American Investment Bank (ABI) last year, followed by Piraeus Bank’s sale of its Albanian subsidiary, Tirana Bank, to local company Balfin and North Macedonia’s Komercijana Banka in 2019. With Emporiki Bank already sold to France’s Credit Agricole back in 2010, Alpha Bank is now the sole remaining Greek unit operating in Albania. 

Alpha Bank has already sold its Serbia business to local MK Group, the holding company of Serbian “sugar king” Miodrag Kostic that has been building up its banking business. 

Meanwhile, Belgian KBC Group bought United Bulgarian Bank AD (UBB) as well as the Bulgarian leasing services provider Interlease from NBG in 2017. 

Other interested parties

OTP is by no means the only international banking group looking to build up a presence in the region 

Raiffeisen Bank has been eyeing opportunities in Hungary and Croatia. In April a Raiffeisen Bank International (RBI) spokesperson confirmed local media reports that the Austrian lender was ready to make an offer for state-owned Budapest Bank. This would significantly increase the value of Raiffeisen's Hungarian subsidiary as such acquisitions are seen as creating synergies in the increase of lending, she noted. However, Raiffeisen could face stiff competition: K&H and Erste are also reportedly interested, but the right-wing government of Viktor Orban would like to keep the bank in domestic hands, and a couple of influential local investors are understood to be interested.

Raiffeisen is also seeking potential acquisitions in Croatia as it plans to increase its market share in the country, the CEO of the bank’s Croatian unit told Reuters.

In Romania, US-based investment fund JC Flowers has been trying to buy and build its way to a major share of the local market, where it bought Piraeus Bank Romania from its Greek parent, renaming it First Bank. More recently, it has signed an agreement to acquire the Romanian subsidiary of Israeli Leumi Bank, according to sources in the banking market quoted by Ziarul Financiar. However, market insiders say it looks like JC Flowers will lose out to EximBank in its quest to take over Banca Romaneasa. 

Meanwhile, Turkish state lender Halkbank is interested in expanding to Moldova, building on its existing operations in North Macedonia and Serbia, Halkbank general manager Osman Arslan told journalists in Skopje, Daily Sabah reported. 

"As a public lender, we are interested in the Balkans area. Moldova has a significant amount of Turkish investment. Therefore, we would like to revive our negotiations there," Arslan said.

Local champions 

Among the major local players, Banca Transilvania has become a champion on the Romanian market having taken over first Volksbank and more recently Bancpost which it acquired from Greek group Eurobank in 2018. 

“Following the absorption of Bancpost, BT wants to consolidate its position on the financial-banking services market as a solid financial institution able to cope both with the growth and decline periods from the Romanian economy,” BT said in a document posted on its website.

Banca Translvania has also expanded into neighbouring Moldova, where it invested into the largest bank, Victoriabank, alongside the EBRD. 

Following the revelation that around $1bn had been stolen from three major banks in a massive fraud that will eventually be paid for by taxpayers, Chisinau has sought to clean up the sector. All three of the country’s largest banks are now in foreign hands: the EBRD together with private investment funds Horizon Capital from Ukraine and the Latvia-based AB Invalda INVL fund took over Moldova’s largest bank Moldova-Agroindbank (MAIB), while Bulgarian holding company Doverie-Invest recently bought a majority stake in Moldindconbank (MICB) and is seeking to buy out minority shareholders. 

Serbia’s Kostic has been looking to buy up banking assets. In addition to Alpha Bank, the businessman’s AIK Banka completed the acquisition of a majority stake in Slovenia’s Gorenjska banka in March, making AIK the first Serbian bank to step into the European Union market. 

Another Serbian lender, Direktna, has also expanded in recent years. The bank bought Piraeus Bank Beograd, as the Greek lender sought to exit the region, after snapping up Findomestic Banka Beograd from its parent Findomestic Banca SpA Italy, part of BNP Paribas.

The owners of Direktna banka are Serbian businessmen Andrej Jovanovic and Bojan Milovanovic. In 2016, the two acquired Kragujevac based KBM Banka/Credy bank from Slovenian Nova Kreditna Banka Maribor (Nova KBM) and renamed it Direktna banka.

More privatisations ahead 

Slovenia is in the process of selling off state stakes in local banks, after six major banks were taken under state control during the bail-in of the sector in December 2013. 

After plans were pulled in 2017, the country’s largest bank NLB held a successful IPO in 2018 that priced the company at around €1.3bn. It was admitted to trading on the Ljubljana and London stock exchanges in November. Slovenia sold 65% of NLB during the IPO and now plans to sell another 10%. 

Abanka is now up for sale. US private equity fund Apollo, Hungarian lender OTP and Serbian AIK Bank are understood to have submitted binding bids for the bank by the March 20 deadline, STA news agency reported. 

Privatisations of three Serbian banks are anticipated in the near future as the government moves forward with sales of state assets with encouragement from the IMF. Belgrade is expected to announce a public call for the sale of the state stake in Komercijalna Banka, the country’s second-largest bank, on May 31, local media reported on May 24. Potential bidders are believed to include Raiffeisen Bank and several others. 

Meanwhile, Serbia has received two offers for its 28.51% stake in Jubmes Banka with just one of them meeting the minimal price of €5mn, eKapija reported on April 24, quoting Finance Minister Sinisa Mali. The government is also preparing its strategy for privatisation of the state-owned stake in a third bank, Srpska Banka.