Banks are vying for dominance in Europe’s east

Bloomberg

European banks are vying for dominance in one of the continent’s most dynamic corners. Governments in parts of eastern Europe, where growth is outpacing the euro area, are loosening their grip on state-held assets. Serbia and Slovenia are the latest to offer stakes in their banks, opening up a potential battlefield as OTP Bank Nyrt of Hungary, Vienna-based Raiffeisen Bank International AG and Erste Group Bank AG and financial investors seek to widen their footprint in the region.
Across former communist eastern Europe, expanding loan books from higher consumer spending are making banks more attractive as takeover targets amid a reshuffling of the industry. In the Balkans, a decades-long wariness is easing about doing business in a region with a reputation of corruption, ethnic strife and economic instability.
“The former Yugoslav republics provide a kind of coming of age story and that makes public investments more reliable,” said Matthias Siller, a fund manager at Barings in London with $310 billion in assets under management. “In the past, a lot of investors would have approached with more caution. Now most people would actually agree that the former Yugo republics offer an interesting story.”
Partly as a result of pressure from the European Union and the International Monetary Fund (IMF), euro-area Slovenia is offering two banks that together account for almost a third of the market and Serbia is selling a lender that controls about 11 percent of the banking industry.
As a sign of the buzz generated by the deals, 14 companies expressed interest in advising the planned sale of Komercijalna Banka AD Beograd, according to the Finance Ministry in Belgrade. The government wants to pick a winner by the end of the year for the bank with assets of 3.1 billion euros ($3.5 billion).
The sale of the nation’s third-largest bank — behind the local units of Intesa Sanpaolo SpA and UniCredit SpA — is a condition for Serbia to fulfill its new 30-month IMF program. The Washington-based lender in July said that the transaction will be completed by the end of September next year.
“Serbia is a very attractive market and Komercijalna is the key to market leadership in terms of scale,” said Klaus Vukovich, a managing partner at Vienna-based investment firm Alantra Partners SA. “Given where the strategic investors stand and also private-equity interest, I wouldn’t be surprised if the outcome here is something more nuanced than a straightforward strategic buy-out.”
Slovenia this month sold 59.1 percent of Nova Ljubljanska Banka dd for 608.6 million euros. The bank was the chief recipient of a 3.2 billion-euro state bailout in 2013 and the EU and European Central Bank have since urged the government to sell its holding. At least five suitors may be interested in Abanka, Slovenia’s third biggest by assets, according to the Finance newspaper in Ljubljana. Potential bidders include OTP, US-based Apollo Global Manage- ment and Blackstone Group LP, Finance reported without saying where it got information. The sale agreement must also be completed by end of next June.