Italian bank buys Ukrsotsbank for $1.3 billion

"High growth rates [are] foreseen both for the economy and banking system of ukraine, which has over 47 million inhabitants."

- Banca Intesa statement.

Companies controlled by Ukrainian business tycoon and parliament deputy Viktor Pinchuk have inked an agreement to sell a controlling stake in one of Ukraine's largest banks to Italy's Banca Intesa in a transaction valued at just over $1 billion.

The sale marks the continued advance of major Western banking groups into the Ukrainian market. Ukrsotsbank is the third of Ukraine's top five banks to be sold to Western banking groups in the last six months. Those sales alone have increased the share of Ukraine's banking market controlled by foreign banking groups from about 5 percent to about 25 percent.

In a Feb. 14 statement, Banca Intesa announced the signing of a share purchase agreement for the acquisition of 85.42 percent of the share capital of Ukrsotsbank. The agreement envisions a share capital increase that will cost about $60 million, after which Banca Intesa would acquire additional shares in the Ukrainian bank, bringing its total ownership to some 88.1 percent.

The transaction, according to the statement, will be completed in two closings, both of which are expected to be finished by September.

"Banca Intesa's cumulative investment at the first and second closings is estimated to amount to approximately $1.16 billion, valuing Ukrsotsbank at approximately $1.3 billion," reads the statement.

Banca Intesa, which outbid other leading European banking groups, said it was eager to enter Ukraine, citing "the high growth rates foreseen both for the economy and banking system of Ukraine, which has over 47 million inhabitants."

"With this acquisition, Banca Intesa is pursuing its planned strategy of selective strengthening in Central and Southeastern Europe, where it is now serving a population of over 80 million people in six countries, in addition to its operations in the Russian Federation," the statement reads.

The Italian banking group currently has a presence in Croatia, the Czech Republic, Hungary, Poland, Russia, Slovakia, Slovenia, Serbia and Montenegro and Hungary.

According to documents and reports by analysts, Pinchuk, son-in-law to former Ukrainian President Leonid Kuchma, indirectly owns a controlling stake in Ukrsotsbank.

Buying spree

A year ago, Ukraine's top banks were controlled by local business groups. The last year has seen Western banking groups devour nearly a quarter of the banking market through acquisitions of three of the nation's top banks.

Toward the end of last year, Ukrainian businessmen sold major interests in Aval Bank and Ukrsibbank to Western banking conglomerates. A controlling stake in Aval was bought by Austria's Raiffeisenbank International Bank-Holding AG for just over $1 billion. A 51 percent stake in Ukrsibbank was estimated to have sold for more than $500 million to France's BNP Paribas S.A.

Aval, Ukrsibbank and Ukrsotsbank account for about 20 percent of the total net assets in Ukraine's banking sector. All three also have large branch networks, making them valuable acquisitions for Western banking groups eyeing a piece of Ukraine's promising retail banking business.

The remaining big Ukrainian banks are either state-owned or have owners who are, at least for now, uninterested in selling.

Informed sources say that a handful of other Western banking groups have been eyeing possible acquisitions in Ukraine. These include France's Societe General, Unicredito of Italy, Erste Bank of Austria, Germany's Commerzbank and Hungary's OTP Bank. Russia's Alfa Bank, controlled by Moscow-based tycoon Mikhail Fridman, was last year reported to be interested in acquiring Ukrsotsbank, but insiders say they lost interest because the asking price rose to more than $1 billion. Insiders say that interest from Erste dropped after the Austrian bank acquired a majority share in a Romanian bank last December for 3.75 billion euros ($4.5 billion).

Roman Olearchyk, Kyiv Post Staff Writer
Feb 16 2006