Subsidiary of Stockholm-headquartered SEB Group to acquire controlling stake in Agio, a medium-sized bank, marking the second time a western group has acquired a Ukrainian bank.
In a statement issued Oct. 4, SEB said its Lithuanian subsidiary Vilniaus Bankas had reached an agreement with Agio shareholders to acquire more than 90 percent of the bank’s shares, for $27.5 million. The bank is waiting for approval to proceed with the transition from regulators in Ukraine and other countries.
Agio’s board chairman Stanislav Arzhevitin told Ukrainian News Oct. 4 that shareholders controlling 94 percent of the bank have agreed to the terms of the sale, while proposals have been sent out to the remaining owners regarding the sale of their shares. Agio documents indicate that a controlling stake in the bank currently belongs to its Ukrainian top managers.
“SEB will be the first Scandinavian bank present in Ukraine,” said SEB Executive Vice President Mats Kjaer. “Vilniaus Bankas has been ranked No. 1 among Lithuanian banks for several years,” Kjaer added, which will give it an advantage when expanding into the Ukrainian market.
While a handful of western banking groups have built Ukrainian subsidiaries from scratch, this acquisition is only the second by a western group in Ukraine’s nascent banking industry, a spokesman for the Association of Ukrainian Banks said.
Established in 1991, Agio bank has 12 branch offices, which is a tiny fraction of the size of large Ukrainian bank networks. Some of Agio’s competitors boast as many as 1,000 regional branch offices.
Nonetheless, SEB said the purchase falls in line with the group’s ambition to capitalize on “increased business activity” in Eastern Europe. SEB spokesperson Viveka Hirdman-Ryrberg said her company plans to add about 20 new branch offices to Agio’s network in the near future.
Bank officials have described Ukraine as an attractive market – one that has posted annual economic growth of seven percent, on average, and has seen its citizens gain increased purchasing power in recent years.
SEB is eyeing other acquisitions in the region, including in Russia, Reuters reported on Oct. 4. SEB’s expansion into the former Soviet Union could proceed in partnership with the European Bank for Reconstruction and Development, which holds minority shares in three Ukrainian banks, although details of the potential partnership remain unclear.
In a statement issued by SEB, EBRD President Jean Lemierre said, “It is encouraging to see foreign banks like SEB looking at opportunities in the Ukrainian market. This is important for the country’s banking sector and sends a positive signal to other investors.
“We are interested in supporting SEB’s operations in Ukraine and are currently exploring a number of opportunities as to how we can do that.”
The EBRD holds a 28.25 percent share in Kredyt Bank Ukraine, a 19.99 percent share in ProCredit Bank and a 10 percent share in First Ukrainian Investment Bank.
Several weeks after telling the Post that his bank was in talks to acquire a share in Aval, one of Ukraine’s largest banks, EBRD spokesperson in Ukraine Anton Usov said Oct. 8 that “we are indeed in talks on participation in Agio’s share capital, but we are not able to disclose details at this point in time.”
Tetyana Byrka, head of the Swedish Trade Council in Ukraine, said SEB’s investment in Ukraine is not the largest in terms of foreign direct investment, citing other projects such as Swedish-backed investments in food company Chumak and a packaging factory owned by Tetrapak. Yet SEB’s expansion into the country serves as a positive signal for the rising number of Swedish companies interested in the country, Byrka said.
“This is one of the biggest Swedish banking groups,” Byrka said. “Cumulative Swedish investments in Ukraine as of 2003 exceed more than $100 million. A lot of Swedish companies interested in Ukraine are watching this move by SEB and I hope this will help improve bilateral economic relations between Ukraine and Sweden.”
SEB Group describes itself as a North European financial group that services more than 5 million customers through 670 branches, with a strong presence in Sweden, Germany, the Baltic States and Poland. The group employs about 20,000 and is represented in more than 20 countries.
Vilniaus Bankas is Lithuania’s leading bank with a market share of about 40 percent and more than 530,000 customers. As of June, SEB’s Lithuanian subsidiary boasted total assets of 2.7 billion euros.
Out of 157 banks operating in Ukraine, Agio ranks 53rd with net assets of 58 million euros. Agio’s assets account for about 0.2 percent of assets belonging to Ukrainian banks, according to the press service of the Association of Ukrainian Banks.
The first Ukrainian bank acquisition by a foreign entity was the European KBC group’s purchase of a controlling stake in Western-Ukrainian Bank, which was renamed Kredyt-Bank Ukraine and recently sold to a Polish Bank.
