In recent years, Privatbank has established itself as the first Ukrainian bank to expand outside Ukrainian turf.
Ukraine’s largest bank by assets, Privatbank, quietly inched forward last week with foreign expansion plans by acquiring a majority stake in a small bank in Georgia.
Majority-owned by two of Ukraine’s richest tycoons – Ihor Kolomoysky and Hennadiy Bogolubov – Privatbank has in recent years treaded against the grain by resisting acquisition offers from superior European banking groups that have rushed to snap up Ukraine’s leading banks for top dollar.
In recent years, Privatbank has established itself as the first Ukrainian bank to expand outside Ukrainian turf, acquiring sizable banking operations in Latvia and Russia, Paritate bank and Moskomprivatbank, respectively.
Last week’s announcement that the Dnipropetrovsk-based bank had paid $25 million to enter a small but promising Georgian market marked the continuation of a daring shareholder strategy to compete with the big boys rather than sell for a big payout. Privatbank’s appetite is large, including plans to sneak into the fast-growing emerging markets of larger competitors, such as China, bank officials said.
Privatbank spokesperson Oleg Serga said his bank acquired a 75 percent stake in Georgia’s Tao bank through a share emission deal completed on May 15.
Buying a bank in Georgia is key. It provides exposure to a fast-growing emerging market that is on the radar screens of banks from Russia, Europe and Israel, according to Serga.
“Georgia is one of the most dynamic banking markets on post-Soviet turf,” said Serga, adding that Georgia’s banking environment is very liberal.
The focus at Tao will be to offer micro-loans and retail banking to a budding middle class.
Privatbank, Ukraine’s largest bank, with nearly $8 billion in net assets and a massive domestic branch network, started its international expansion back in 2002, purchasing a 95 percent stake in Latvia’s Paritate Banka. That acquisition singled out Privatbank as the country’s first and only bank to expand abroad. The Ukrainian banking major later purchased Moskomprivatbank in Moscow and setup a small affiliate in Cyprus.
“In the near future we plan to open affiliates of Paritate bank in Spain, Italy and Privatbank’s affiliate in China,” Serga added.
Oleh Pronin, an analyst at Kyiv-based investment bank Dragon Capital, dubbed Privatbank’s Georgian expansion a smart move. It offers coverage in a fast-growing market and could significantly bolster the value of Privatbank should the Ukrainian owners decide to sell in the future, he said.
“Geographical diversification will be a trump in purchase talks with potential buyers,” he added.
A handful of Ukrainian businessmen have sold their stakes in leading Ukrainian banks in recent years at price tags ranging from $500 million to over $1 billion.
The flurry of acquisition deals completed in recent years has seen the presence of foreign banking on the domestic banking market grow threefold to 30 percent.
Austria’s Erste Bank entered the Ukrainian banking market, acquiring a 50.5 percent stake in Kyiv-based Prestige bank for $35.3 million. The Austrian bank has since bought out the rest of this bank for $104 million.
Hungary’s OTP banking group bought a banking operation that Raiffeisen had in Ukraine prior to its $1 billion acquisition of Aval, paying about $860 million.
France’s BNP Paribas paid about $500 million for a 51 percent stake in one of Ukraine’s largest banks, Ukrsibbank. France’s Credit Agricole purchased a 100 percent stake in Kyiv-based Indeks-bank for $260 million.
And Swedbank purchased TAS-Kommertsbank for $735 million, including an additional payment of up to $250 million payable in three years, subject to the bank’s financial performance.
Banking industry insiders expect this trend will continue in coming years, yielding foreign banking groups control over about half of Ukraine’s banking market.
Privatbank, one of the last large Ukrainian banks not yet sold to a large foreign competitor, could sell for significantly more – $3-4 billion – due to its leading position in Ukraine and growing presence abroad.
