OTP takes another bank and continues to expand in the region

OTP is expanding in Albania

OTP has signed a sale and purchase agreement with Alpha International Holdings Single Member SA to acquire a 100 percent stake in Alpha Bank, an Albanian subsidiary of the Greek company Alpha Bank SA.

The transaction is expected to close financially at the end of the second quarter of 2022, subject to obtaining the necessary regulatory approvals.

Alpha Bank is the 8th largest bank in Albania with a market share of almost 5%. As a universal bank, it is active in both the retail and corporate segments. At the end of last year, the Albanian bank employed 416 people and operated 34 bank branches.

The bank was still loss-making in 2017 and 2018, with a profit of only around € 1 million in both 2019 and 2020.

The Albanian bank is operating at an extremely low return, last year the return on equity was only 1.2 percent and the return on assets was 0.1 percent, meaning OTP will have something to fix at the Albanian bank. Just to put it into perspective: the ROE of the OTP Group in the first 9 months of this year was 16.9 percent, and that of the Albanian OTP was 17.2 percent.

The purchase price is public

In recent years, we have become accustomed to OTP not disclosing how much it paid for banks bought in the region, and since it took over-the-counter financial institutions from SocGen and the French bank, OTP agreed not to disclose how many of either deal we found out how much the Hungarian bank paid.

After a larger round of acquisitions, OTP reported that banks were bought at roughly book value.

Now the situation is different, because OTP said that

The purchase price was agreed by the parties at EUR 55 million,

that is, Alpha Bank cost HUF 20 billion at the current exchange rate.

Alpha Bank’s equity was € 72.7 million at the end of last year, based on which OTP will buy the Albanian bank at a P / BV multiplier below its book value at an attractive price.

The relatively low pricing factor can be justified by the bank’s still very low profitability and return.

The Albanian job

OTP announced in August 2018 that it had acquired a majority stake in the Albanian and Bulgarian subsidiaries of Societe Generale. On March 29, 2019, the financial closing of the OTP Albanian transaction took place, as a result of which the Albanian subsidiary of Societe Generale, Banka Societe Generale Albania, became 100% owned by OTP.

With a market share of almost 6%, the Albanian bank is the 5th largest bank in Albania, active as a universal bank in both the retail and corporate segments.

At the end of September, OTP Albania had a balance sheet total of HUF 319 billion, making it the second smallest bank in the OTP Group after Moldova.

In the first 9 months of this year, OTP’s Albanian bank generated HUF 9.7 billion in total revenue and HUF 3.9 billion in after-tax profit for the banking group.

Conveyor belt

Since 2014, OTP has acquired 12 financial institutions in the region, including Splitska in Croatia, Exspressbank in Bulgaria, SocGen in Serbia and SKB in Slovenia. The Alpha just bought is one of the smaller ones.

Following the completion of the Slovenian transaction, OTP will become the market leader in five countries: Hungary, Bulgaria, Montenegro, Serbia and Slovenia.

An important step

The Bulgarian bank now acquired is a small OTP acquisition in recent years, yet its role is important, as OTP aims to achieve at least a 10 percent market share in its markets, which it could obviously have achieved organically by developing its Bulgarian bank from SocGen. the goal is met.

Albanian OTP and Alpha Bank have a combined market share of 10.9 percent of total assets.

What else can come?

In an interview with Portfolio, Sándor Csányi talked about slowing down a bit after the Slovenian acquisition and the acquisition of the Uzbek bank.

OTP does not plan to invest in Western Europe, it will remain in our region and in the countries of the former Soviet Union.

Outside of Uzbekistan, we may be joining soon. We haven’t had an announcement in the Asian market yet, but in a special structure, we may soon be there as well,

said Sándor Csányi.

Incidentally, in mid-October, Russian newspapers reported that the Czech PPF group would sell the Russian Home Credit & Finance bank and OTP could be one of the potential entrants. The Czech PPF group is looking for a buyer for its Russian bank, Home Credit & Finance, said Knowingly one bank of the bank and another bank source. Frank Media was the first to write about the possibility of selling Home Credit to Hungarian OTP, citing sources.

The exchange rate is rising

Following the opening of the market, OTP’s share price jumped to around 1 percent, which can be partly explained by the acquisition of the Albanian bank, but largely due to the improvement in international capital market sentiment. OTP’s share price has risen 34 percent this year.

Cover image: Pavlo Gonchar / SOPA Images / LightRocket via Getty Images

Source: Portfolio.hu – Bank by www.portfolio.hu.

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