Local businessmen are rushing to pounce on the golden opportunity being offered by foreign banks, who continue to divest their Ukrainian assets at prices far below those they paid before the global financial crisis.
One of the most active buyers in the past few years has been Mykola Lagun, the owner of Delta Bank. He has bought Swedbank and Kreditprombank, as well as the mortgage and loan portfolios of UkrSibbank and Ukrprombank.
Should plans to merge Swedbank and Kreditprombank under one brand be realized, Delta Bank would become the fifth biggest bank in Ukraine with assets of about Hr 45 billion, according to Deloitte Ukraine. But the banker doesn’t plan to stop there. According to Forbes Ukraine, some companies connected with Delta Bank are performing due diligence on Platinum Bank. Platinum Bank is accepting bids from whoever wants to buy it, but is not talking about potential buyers yet.
Lagun started his career in the 1990s as an employee of VABank and later became the treasurer of Ukrsotsbank that at the time it was controlled by Valeriy Khoroshkovsky. As Forbes Ukraine wrote, he had good relations with Khoroshkovsky and received 10 percent of the bank’s shares, which in 2004 Lagun sold to billionaire Viktor Pinchuk. In 2006, Lagun received loans from Pinchuk and Deutsche Bank to establish Delta Bank.
In 2010, standing firmly on his feet, Lagun purchased the loan portfollio of Ukrprombank, one of many financial institutions that suffered in the aftermath of the 2008 financial crisis. Under government control at the time, Lagun paid Hr 3.1 billion over five years to the central bank. The mortgage portfolio of UkrSibbank cost him about Hr 1 billion ($125 million) in 2011.
But Lagun reached peak purchasing activity in the first half of 2013 with two transactions connected with Swedbank and Kreditprombank. Swedbank had been looking to exit Ukraine, after incurring losses that amounted to $1.5 billion, according to Forbes.
“This is the final step in our strategy to concentrate Swedbank’s business activities to Sweden and the three Baltic countries. The executive management can now turn its full attention to our home markets,” Swedbank’s CEO Michael Wolf said. Lagun paid about $175 million for Swedbank.
Lagun’s fourth banking asset, Kreditprombank, cost him only $1. The bank had also suffered crisis-related losses and from a conflict between its co-owners, which devalued its assets. At the end of April Kreditprombank announced the closure of several branches and a merger with Delta Bank to take place within the next several months.
Oleksiy Aristov, director of the corporate finance department of Deloitte, says the main advantage of fast acquisitions of this type is rapid growth of the customer base and market presence.
“But there are also some drawbacks – the need for additional funding of distressed assets and also the need to urgently assess large numbers of client portfolios and assets,” he says. The unification of business processes and bank products is also huge challenge, Aristov says.
Too busy scooping up bank assets, Lagun isn’t looking to sell anything in the next few years.
“Right now I’m not interested in selling Delta Bank, buying is what interests me the most,” he told Forbes Ukraine. “There is a unique time now, from the buyer’s point of view. If you have a strategy for more than two years, you have to buy today. And this situation is not only in the banking sector,”
What Lagun is perhaps very good at is communication with governmental officials.
During last two years Delta Bank successfully bid for public procurement contracts to purchase Naftogaz government bonds. Since 2011, Delta has signed bond purchase agreements with state-run Naftogaz worth Hr 87.19 billion, which is more than half of all deals for that period.
Banks are usually chosen through non-transparent procurement procedure often involving a single-bidder, which means that Naftogaz itself chooses the winner. Theoretically, government bonds should help Naftogaz pay for Russian gas. In fact, it mostly serves to increase the company’s debt, according to Ekonomichna Pravda web-site investigation. At the same time, the government bonds are a good money-making opportunity for Lagun.
In January alone Delta Bank earned Hr 240 million of interest on a bonds deal worth Hr 5.9 billion – and it was just one of many of Delta’s state bonds deals.
Kyiv Post staff writer Kateryna Kapliuk can be reached at [email protected].
