Italy’s Intesa Sanpaolo signed a Feb. 4 deal to buy a 100 percent stake in Ukraine’s sixth-largest bank, Pravex, for 504 million euros ($750 million).
The acquisition of Pravex by Italy’s second-largest bank is the latest advance by European banking groups into Ukraine, as foreign banks have increased their market share from below 10 percent to more than 35 percent in the past three years, based on net assets.
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, sold by Kyiv Mayor Leonid Chernovetskiy and direct relatives, is a commercial bank entirely dedicated to retail banking and serving household clients.
Its network includes about 560 branches in Ukraine.
Intesa’s purchase also marks the third significant cross-border merger and acquisition (M&A) deal struck this year, analysts said.
The three deals give Ukraine an early 2008 boost in foreign direct investment (FDI), which now stands at $3.5 billion, nearly half of total FDI accumulated last year, experts said.
ING Bank forecasts at least $9 billion in FDI in Ukraine this year, or almost $2 billion more than in 2007.
“The former owners (of Pravex) 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 attempt by Intesa to buy a larger bank in Ukraine, Ukrsotsbank, collapsed early last year.
Intesa’s main rival in Italy, the larger UniCredit Bank, moved swiftly to snap up Ukrsotsbank, ranked as one of Ukraine’s top five banks.
UniCredit’s $2.2 billion purchase of Ukrsotsbank was completed on Jan. 23.
Other major foreign purchases in Ukraine this year have come in the steel sector, with Russian metal groups moving in.
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 for top dollar is Kreditprombank, ranked 13th by net assets and controlled by Greek citizen and businessman Viktor Nusenkis, according to sources.
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 a financial scandal that erupted early this year could cause the group to back out of the bidding, financial experts said.
Nevertheless, the fierce competition is a sign that the valuation of Ukrainian banks remains high, a Concorde Capital report stated.
The report said the high prices paid in recent bank sales suggest a sizable upside for other aggressive retail banks considered takeover candidates in the next 12 to 15 months, namely Rodovid, Ukrgazbank, and Megabank.
