Page 12 - EBRD_newspaper_May2017

12 bne IntelliNews Daily Southeastern Europe
May 9, 2017
Nova KBM drives consolidation in Slovenia amid changing SEE banking landscape
Clare Nuttall in Bucharest
At the beginning of 2017, Slovenia’s second largest bank Nova Kreditna Banka Maribor (Nova KBM) announced its merger with for- mer RBI bank subsidiary KBS banka. The merger, which formally went ahead after getting clearance from a local court, is part of a growing trend of consolidation within Southeast European banking markets.
Slovenia, where the state became heav- ily embroiled in the banking sector after a series of bailouts in 2013, is set to remain a rich source of deals as Ljubljana continues its efforts to exit its investments into some of the country’s largest banks.
Nova KBM was sold to US fund Apollo Global Management and the EBRD under a deal struck with the Slovenian government in June 2015, with the two investors taking 80% and 20% respectively.
“The privatisation of NKBM demonstrates the authorities’ commitment to the reform agenda and the will to transform the bank,” said Nick Tesseyman, EBRD managing di- rector, financial institutions, when the deal was announced.
“As a shareholder, the EBRD will be working very closely and actively with the new majority owner Apollo in support of the restructuring of the bank and the introduc- tion of the highest standards in corporate governance.”
Meanwhile, an Apollo affiliate acquired the RBI subsidiary for an undisclosed sum in December 2015, and the two have now been bolted together. Nova KBM had taken a previous step towards becoming a regional champion – a goal outlined by Apollo partner Gernot Lohr in an April 2016 interview with Bloomberg – with its merger with another local bank, Postna banka Slovenije.
The merger with KBS gave Nova KBM the largest branch network of any bank in Slovenia with 70 branch offices and 17 busi- ness units serving corporate customers, in addition to providing services through more than 500 post offices and contractual post
offices. As of January 2017, its market share stood at 13.3%.
Since then, Apollo has acquired the coun- try’s leasing market leader Summit Leas- ing Slovenija, in what Michele Raba told local media was “the next step towards the ambitions goal of Nova KBM becoming the leading universal bank in the country”, STA reported.
A new CEO, Citibank veteran John Denhof, was also appointed in March to spearhead the bank’s further development.
The privatisation of Nova KBM was the frontrunner in the planned sales of several other Slovenian banks taken under state control in 2013. The country's largest lender
“SEE is not much different from other re- gions of the world in that it is over-banked,” commented Hugh Owen, M&A partner at Allen & Overy Budapest and head of the law firm’s Southeast Europe desk.
Aside from Slovenia, Serbia in particular is considered a market ripe for consolida- tion. The sale of state-owned Komercijalna banka has been hotly anticipated, with ex- pectations of a breakthrough in the long process of offloading the bank this year. Meanwhile, in 2016 the bank was rumoured to be planning to acquire an unnamed for- eign bank in Serbia in an attempt to make it a more appealing target for future buyers.
M&A among smaller banks, as seen in
of troubled Volksbank Romania turned the Cluj-based lender into the country’s second largest bank by assets, overtaking BRD-So- ciete General.
Other deals in the last few years include OTP Bank Romania’s purchase of the local operations of Portugal’s Millennium Bank, UniCredit Tiriac Bank’s acquisition of RBS Romania’s corporate business, and most re- cently, the merger of Banca Comerciala Car- patica and Patria Bank (formerly Nextebank).
Advisers forecast more of the same this year. Jonathan Wheatley, director, financial sector transactions at PwC, notes that a number of banks are currently in the sale process, and “we expect 2017 to be a year in which more than one banking transaction may take place”.
Wheatley lists numerous drivers for con- solidation in Romania, which broadly fit the pattern for deals across the SEE region. “One of the most important factors has been the trend of foreign banks to refocus on their home markets since the onslaught of the financial crisis, often as a response to polit- ical pressure at home,” he said.
“Other drivers include deleveraging as a condition for receiving state aid, where banks are required to divest non-core and non-stra- tegic businesses in response to receiving a bail out from state authorities ... There are also a number of mid-sized banks that are struggling to compete with the top-tier banks and may have to decide whether they wish to continue to operate in this market or not.”
But while investors are reportedly eye- ing 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 – Montenegro for example has 15 banks serving its popula- tion 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.
“Medium-sized banks are looking for slightly smaller targets to consolidate”
Nova Ljubljanska Banka (NLB) is due to be sold off via an IPO this year; exiting the in- vestment is part of Ljubljana’s commitments to the European Commission, although pres- sure from several MPs opposed to a hasty sale of the company could lead to a phased sale of the state’s stake in the bank.
This comes amid a growing number of M&A transactions across Southeast Europe’s bank- ing markets, with more sales expected in the coming years as Greek banking groups under pressure at home look for exits for their com- mitments to the region. Other drivers include the high density of banks in relatively small markets, and reevaluation of their role in the region by other European banking groups.
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,” said Alexander Rakosi, partner at CMS Reich-Rohrwig Hainz in Vienna.
“Secondly, the market is saturated in terms of coverage and density so me- dium-sized banks are looking for slightly smaller targets to consolidate and enter the upper echelon of financial institutions in that country.”
Meanwhile, in Romania, the region’s larg- est economy, there has been a spate of re- cent deals. Banca Transilvania’s takeover