Page 11 - Buy Russia - bne IntelliNews monthly magazine April 2017

bne April 2017 Companies & Markets I 11
Romania by Banca Transilvania and the sale of Citi’s retail arm to Raiffeisen – overall there is a scarcity of buyers.” He adds: “The potential buyers are mainly people who are present here already. A natural buyer would be a banking group from the region, but the region was especially hard hit by the crisis.”
Wheatley says he has seen a high level of interest in the Romanian banking sector due to the country’s positive macro- economic situation and potential returns from the banking sector, but he still sounds a note of caution. “One of the main concerns of international investors has been the uncertainty surrounding the political and legal framework affecting the banking sector in Romania,” he says, citing the debt discharge law and the potential risk of banks having to convert Swiss franc loans to lei at historic exchange rates.
“There are a number of mid- sized banks that are struggling to compete with the top-tier banks”
Birsan cites the same issues, along with non-performing loans, which “made banks somewhat difficult to digest”, though he adds that, “Recent developments in some of these areas are, however, encouraging in terms of a rebalancing of the risk levels.”
Some international banks active in Romania have launched legal challenges to the debt discharge law adopted in 2016, under which distressed mortgage borrowers are allowed to hand back their properties to the banks with no further obligation.
Over-banked
Following a similar path to Southeast Europe’s largest economy, transactions are also expected in other markets in the region. “SEE is not much different from other regions of the world in that it is over-banked,” says Hugh Owen, M&A partner at Allen & Overy Budapest and head of the law firm’s Southeast Europe desk.
Serbia in particular is considered a market ripe for consolida- tion. The sale of state-owned Komercijalna banka has been hotly anticipated, with expectations of a breakthrough in
the long process of offloading the bank this year. Mean- while, in 2016 the bank was rumoured to be planning to acquire an unnamed foreign bank in Serbia in an attempt
targets to consolidate and enter the upper echelon of financial institutions in that country.”
Slovenia has also been an active market for financial sector M&A in recent years, driven partly by efforts to restructure and sell off banks nationalised during the banking crisis in 2013. Ljubljana is required to sell off the country’s largest bank, Nova Ljubljanska Banka (NLB) this year under its com- mitments to the European Commission. The IPO is expected before the end of 2017, despite rumours that the government might ask Brussels for an extension.
The country’s third largest lender, Abanka, is also in state hands and has to be sold off by 2019. The bank has already been merged with Banka Celje in a transaction that closed in 2015, and was included on Slovenian Sovereign Holding’s privatisation plan for this year.
However, this may not be a smooth process. “Slovenia has usually had an extra layer of complexity to getting deals done, either through complex ownership structures, or politics get- ting in the way,” warns Owen.
Elsewhere in the region, Rakosi says the situation in Croatia
is similar to that in Serbia. “There is consolidation on the market, with smaller banks being swallowed up by larger ones, while some of the larger players are offloading NPL portfolios, possibly as part of a bigger strategy for further M&A activity,” he tells bne IntelliNews.
Exit the Greeks
Another important driver for M&A is the ongoing withdrawal of Greek banking groups from the region.
“Reducing the foreign presence (and increasing the capi- tal) of NBG, Piraeus Bank, Alpha Bank and Eurobank, the four largest Greek banks, is part of the European Com- mission’s plan designed to restructure the Greek bank- ing sector,” says Owen. He points to previous deals such as Alpha Bank’s agreement to sell Alpha Bank Srbija to
SEE: Market share Top 5 banks
80%
60%
40%
20%
0
to make it a more appealing target for future buyers.
M&A among smaller banks, as seen in neighbouring Romania, is also on the cards. “There are two sides to the M&A landscape in Serbia. Firstly, some of the larger banks are in the process of privatisation or about to start such processes,” says Alexander Rakosi, partner at CMS Reich-Rohrwig Hainz in Vienna.
“Secondly, the market is saturated in terms of coverage and density so medium-sized banks are looking for slightly smaller
RS BG RO BA HR AL
% of total assets
2010 2015 Source: national sources, RBI/Raiffeisen Research www.bne.eu