May 2, Hungary's leading bank OTP has bought 100% of Raiffeisenbank Ukraine for ?650 million, 4.7 times the book value, Portfolio informs.

According to earlier speculations OTP was to pay ?500 million. By this purchase OTP has stepped onto yet another country's banking market, which is seen having the potential for massive growth in the next five years. OTP has another Ukrainian bank among its acquisition targets, but in light of the ?650 million purchase price the question arises how this would (with a Russian bank also in the acquisition cross-hair) fit into OTP's ?1.1-1.2 billion budget. However, there are too facts that should soothe minds, namely that the new unit is profitable and its 16.4 P/E ratio also seems acceptable.

While investors will certainly raise eyebrows over both the purchase price and the detachment from Raiffeisen, it should be welcomed that OTP has finally managed to put its hands on a bank of decent size after a series of failed acquisition attempts.

Representing the buyer OTP Bank, Chairman and CEO Dr. Sándor Csányi and Deputy CEO László Wolf, and representing the sellers Raiffeisen International Bank-Holding AG and Raifffeisen Zentralbank Österreich AG, Dr. Herbert Stepic, CEO of Raiffeisen International and Jeffrey Millikan, CIS Managing Director of Raiffeisen International signed the sale and purchase agreement for the acquisition of a 100% stake in Raiffeisenbank Ukraine (RBUA), the 100% subsidiary of Raiffeisen International Bank-Holding AG. In accordance with the document signed in Vienna, OTP Bank will pay a purchase price of ?650 million for the bank. The purchase price is based on RBUA's current and potential value, and on the favourable growth potential of the Ukrainian banking market.

Following the acquisition of Raiffeisenbank Ukraine, OTP Bank wants to further strengthen its positions via acquisitions, besides organic growth in Ukraine, where 166 banks operate according to the most recent data of the National Bank of Ukraine. At the end of last year Ukraine's banking sector's aggregated total assets/GDP ratio was around 50%, which allows a significant growth potential. OTP Bank's aim in Ukraine - with Ukraine rated Ba3 with stable outlook by Moody's - is to provide full range of financial services to both retail and corporate clients. In order to achieve this, OTP Bank plans to build a banking group, just like in other countries where it is present.


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