Page 12 - Buy Russia - bne IntelliNews monthly magazine April 2017

12 I Companies & Markets bne April 2017
local MK Group. “Rumours abound (though some were recently denied) of pending bank sales by the Greek banks. The market sees many of these as inevitable,” he says.
Rakosi also expects more Greek banks could try to exit the Serbian market. “There are some initiatives on the non-per- forming loan front, and offloading NPL portfolios can be an indicator that banks are cleaning their balance sheets prior to contemplating additional strategic moves,” he says.
There has also been speculation about sales of the operations of the four Greek banks currently in Romania. Most recently, Eurobank confirmed to Reuters it had hired HSBC and Medio- banca to find a strategic investor for its Romanian subsid-
iary BancPost. Wheatley forecasts that at least some will exit the market in the next 18 months. However, he believes there are arguments in favour of at least one Greek banking group remaining in the country.
“It is important to note that Romania has been a core market for the Greek banks over the past 10 years and one of the few sources of profitability for them in recent years,” he says. “Moreover, there remain many Greek businesses active in Romania, who may be interested to have a Greek partner bank to operate with.”
Greek banks have already taken steps to reduce their presence in Bulgaria, the SEE country whose economy is most closely tied to Greece’s. In July 2015, Eurobank acquired the Bulgar- ian branch network of another Greek lender, Alpha Bank. Eurobank paid a token price of €1 for the loss-making Alpha network. M&A transactions involving Greek banks have con- tinued in the market. More recently, National Bank of Greece (NBG) agreed to sell 99.1% of its Bulgarian unit United Bul- garian Bank (UBB) to Belgium’s KBC Group in December 2016. The price of €610mn also included UBB’s leasing subsidiary Interlease EAD.
SEE: Foreign ownership
At the same time as Greek banks – and to a lesser extent bank- ing groups from some other European countries – are looking to exit Southeast Europe, new players are targeting the region.
At the height of the global financial crisis and immediately afterwards, when some banks were leaving the region, “there were one or two banks at that time who saw the opportunity to expand and took it”, says Owen, citing the example of Hungary’s OTP, which has expanded in countries including Romania and Croatia.
“Slovenia has usually had an extra layer of complexity to getting deals done”
“In other cases, local players made some opportunistic acquisi- tions while the larger Western European banks were busy sorting out what to do in many of their larger markets, still less focusing in the short term on what to do in SEE.”
MK Group, owned by Serbian “sugar king” Miodrag Kostic, has become another force for consolidation. As well as snapping up Alpha Bank Srbija, he owns Serbian lender AIK banka, which recently got the go-ahead to raise its stake in Slovenian peer Gorenjska banka.
At the same time, advisers say international private equity firms are also eyeing the banking sector in the region, usually with the aim of buying up several banks and bolting them together to form a major player.
This strategy was employed by US fund Apollo in Slovenia, where it bought the 80% country’s second largest bank Nova Kreditna Banka Maribor NKBM alongside the European Bank for Reconstruction and Development (EBRD), which took
a 20% stake. NKBM was later merged with Postna banka Slovenije in 2016.
However, a similar attempt by US investment fund JC Flowers to build a strong player in Romania fell through. The fund had planned to buy troubled Carpatica banka, which it then planned to merge with other small Romanian banks, but later dropped its plans after failing to buy Piraues Bank Romania.
But while investors are reportedly eyeing the larger SEE markets, in particular Romania, Serbia and Slovenia, appetite to enter the smaller countries is lower. Similar arguments for consolidation can be made for the smaller countries – Mon- tenegro for example has 15 banks serving its population of just over 600,000. However, advisers say the expected returns for entering such small markets are unlikely to be sufficiently attractive to potential acquirers.
100%
80%
60% 40% 20%
0
HR RS BG BA AL RO
% of total assets
2010 2015 Source: national sources, RBI/Raiffeisen Research www.bne.eu