PrivatBank expands into Georgia

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Aug. 9, 2007, 1:15 a.m. | Business — by Nazar Kudrevsky
Ukraine’s largest privately-owned bank acquires 75 percent stake in Taobank, Georgia’s 14th largest bank by net assets s banking business, snapping up some of the country’s largest banks in the last two years, Ukraine’s largest privately-owned bank has firmly stayed its own M&A course, quietly buying banks abroad.

Igor Kolomoysky and Gennady Bogolubov, the billionaire owners of PrivatBank, Ukraine’s largest bank by net assets and branch network size, have thus far resisted offers to sell their prized bank, opting instead to increase value by expanding abroad.

Last week, PrivatBank announced its acquisition of a 75 percent stake in Taobank, Georgia’s 14th largest bank by net assets, for $24 million – a price well within the range of PrivatBank, which currently boasts assets of $8 billion.

With the purchase, PrivatBank continues a strategy of expanding onto foreign markets, having acquired Latvia’s Paritate Banka in 2002 and Russia’s Moskomprivatbank in 2004.

PrivatBank spokesperson Oleg Serga said the main focus of the bank’s operations in Georgia would be offering traditional banking services to both corporate and household clients.

PrivatBank decided to acquire the stake in Taobank because “[Taobank’s] team of managers understands the trends of the market very well and can work well in line with [PrivatBank’s] corporate ideology,” Serga said.

The bank’s Georgian investments will focus on developing its regional network and building up a strong ATM network.

PrivatBank currently leads the Ukrainian banking sector in network size and number of ATMs. The bank currently boasts 2,606 branch offices, more than twice the number operated by its two closest privately-owned rivals, Raiffeisen Bank Aval, with 1,300 branch offices across the country, and UkrSibbank, with 1,000.

PrivatBank also operates 3,947 ATMs in Ukraine, compared with 2,017 ATMs operated by Raiffeisen Bank Aval, and UkrSibbank’s 647 as of June 1 this year.

PrivatBank had tried breaking into Poland’s banking market in recent years with the acquisition of a small bank there, but dropped the plans in connection with what PrivatBank has described as Poland’s protectionist policies, according to Serga.

Instead, the bank has been looking further east.

“This year we will open our representative office in China,” said Serga. According to China’s banking sector regulations, a bank can start its operations only after opening a representative office there.

A Paritate Banka branch office currently operates in Portugal. There are also plans to open representative offices of this bank in Italy, Spain and Greece, according to Serga, who said these countries offer strategic growth opportunities for PrivatBank.

Many Ukrainians work in Portugal, Italy, Greece and Spain. PrivatBank’s aim is to develop niche markets in these countries by offering those Ukrainians services in their native language. The possibility of cashing in on money transfers from these countries to Ukraine will also offer PrivatBank growth potential.

The launch of PrivatBank’s operations in Georgia and China likewise corresponds to the bank’s strategy of servicing its clients in foreign countries. Currently, trade and other relations are intensifying between Ukraine and Georgia, as well as China.

“We follow the clients,” Serga said.
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