The acquisition of Pravex Bank comes almost a year after Intesa failed to buy 85.42% in one of Ukraine’s major banks, Ukrsotsbank, when local regulators suddenly delayed the approval of the deal and Intesa abandoned its takeover plans. The Pravex deal is seen as another step in Intesa’s strategy of selective acquisitions in eastern Europe and the Mediterranean. Intesa’s choice in favour of Pravex is explained by the retail business focus of the Ukrainian bank. Rothschild, KBC Securities Baltic Investment Company and Baker & McKenzie were consultants in the deal.
The mayor’s major asset
Pravex Bank was founded in 1992. It is a commercial bank completely focused on retail banking to households and provides personal, mortgage, and auto loans as well as credit cards. It is rated as Ukraine’s sixth largest retail bank, with a network of about 560 branches and more than 2,000 points offering consumer loans in different areas of trade. It is also one of the three major providers of point-of-sale consumer finance.
Pravex Bank ranked 22nd by assets in 2007 among 170 Ukrainian banks. Its net assets were valued at UAH 6.075 billion as of January 1, 2008 when its credit portfolio amounted to UAH 3.921 billion and capital totaled UAH 724.8 million. The bank ended 2007 with a net profit of UAH 24.401 million.
Family business
The major shareholders of Pravex Bank are Kyiv Mayor Leonid Chernovetsiy, who owns 7.0% directly and a controlling stake indirectly via his son Stepan with 61.43% and his daughter Khrystyna with 7%. Other shareholders controlled by the family are Pravex Brok LLC, with 10.68% and the insurer OJSC Pravex Strakhuvannia with 2.32%. Stepan Chernovetskiy, who is chairman of the board, stands to receive close to USD 450 million out of the deal.
Experts and analysts have said the price of the deal with the Italian buyer is too high and way above any independent market evaluation of Pravex. Some explain that this is by suggesting that a significant premium was paid for the bank because of its attractive existing retail network, as well as its large client base.
Others attribute the high price to the fact that there was a lot of competition among foreign suitors for the bank, pushing the price higher than its market value. “There were too many banks interested in buying Pravex, that’s why the price grew,” Volodymyr Khlyvnyuk, CEO of Ukraine’s Finance and Credit Bank, was quoted by Delo business daily as saying.
News reports had previously claimed that Pravex was wanted by US-based GE Money, then by the Greece’s National Bank. Stepan Chernovetskiy repeatedly denied the reports. “This is rubbish. No acquisition talks are being held with a single bank at the moment,” he said as recently as late 2007, according to Delo.
Source: Delo
Sale linked to mayoral election
Rumours over a possible Pravex sale have consistently been linked to suggestions that under-fire Chernovetskiy may be preparing to liquidate his assets and withdraw rather than stand in a likely new mayoral election in the Ukrainian capital and face the prospect of facing criminal charges if he loses office. He has been accused of involvement in a number of land grab scandals since taking over the top job in Kyiv in spring 2006 and members of the Pora and Our Ukraine/People’s Self-Defence blocs have been vocal advocates of fresh elections. Protests were held in central Kyiv last week against Chernovetskiy, with demonstrators employing figures dressed as aliens in reference to the eccentric Kyiv mayor’s nickname of Lyonia Cosmos, a comic handle which derives from his often incoherent public statements and unorthodox approach to political debate.
Chernovetskiy’s supporters however hit back by demanding action over the well-publicised recent incident between Chernovetskiy and Interior Minister Yuriy Lutsenko, a long time rival for the most prestigious municipal job in the country. Lutsenko is said to have punched Chernovetskiy at a meeting in the presidential secretariat following a verbal confrontation, further deteriorating a frosty relationship which has seen the two trade accusations of drug abuse and alcoholism exchanged between the two political pugilists. Since the now-infamous clash there have been calls for Lutsenko to resign and accusations that the head of Ukraine’s police force had disgraced his office.
The new Italian player
The arrival of the Intesa Sanpaolo Group in Ukraine marks the further development of international involvement in the Ukrainian banking sector and continues a trend that has seen major foreign players greatly extend their influence in the sector. Intesa is already present in central and south-eastern Europe through its local retail and commercial subsidiaries in countries, including Albania, Bosnia and Herzegovina, Croatia, the Czech Republic, Greece, Hungary, Romania, the Russian Federation, Serbia, Slovakia and Slovenia. It has more than 1,200 branches serving about 7.2 million customers
The group is the EU’s third largest in terms of size of market capitalisation (around EUR 60 billion). It is the leading banking group in Italy in terms of loan and deposit portfolios and enjoys an approximate market share of 19%.
Continuing boom
This latest sale marked the continued expansion of European banking groups into Ukraine. A blizzard of acquisitions during the past three years has increased the presence of foreign banking groups in Ukraine in terms of net assets from below 10% to more than 35%. Although the banking industry is facing many challenges in Ukraine, including soaring inflation, experts predict the growing interest of international players in sinking their teeth into the country’s tastiest piece of the financial pie throughout much of 2008.
