BIG BANKS BUILD STRONGHOLDS
The market share of international banks in Eastern Europe has grown 21% in the last two years. Hypovereinsbank's USD7BN merger with Bank Austria is aiming at creating the largest foreign bank in the region. Plans are afoot that will see the privatization of Komercni Banka, the last big Czech state bank, and Slovenska Sporitelna, the biggest Slovakian bank. Bank consolidation is big business throughout Central and Eastern Europe, and is key to increasing the operational scope of the privatized banks as they face more competition.
In Poland, Hypovereinsbank has majority shareholdings in the merged BPH and PBK. Also in Poland, Citigroup has taken over Bank Handlowy - and it was recently decided to merge this with Citibank Polska to create the country's fourth largest financial institution. Ireland's AIB also has interests in Poland's WBK and Bank Zachodni, which are also set to merge.
Not far behind Hyppovereinsbank is KBC, which has been busy establishing a presence in Hungary. Their subsidiary KH Bank will merge with ABN Amro's Magyar Bank to create the second largest group in Hungary. Owned 66% by KBC and 33% by ABN, the group will have assets of EUR3.8BN and a 15% market share.
In the Czech Republic strategic moves centre on the activities of Ceskoslovenska Obchodni Banka (CSOB). In May 1999 KBC acquired a 66% share in CSOB which it reinforced with another 16.66% from the National Bank of Slovakia, at the end of the year. In June of this year Investicni a Postovni Banka (IPB), the third biggest Czech Bank, found itself in severe financial difficulties with the result that it was placed under forced administration by the central bank and then sold to CSOB.
The third heavyweight in the Eastern European ring is Italy's Unicredito. Not to be outdone, it has recently gained control of Bulbank, the biggest bank in Bulgaria. With the National Bank of Greece buying a 98% stake in UBB, this means that 70% of the Bulgarian banking market is in foreign hands. Unicredito's purchase will complement a controlling stake in Pekao, the second biggest bank in Poland. It is also planning to bid in the Kommercni and Slovenska Sporitelna privatization, as well as bidding for Lithuania's LZUB.
Croatia is also a focus of foreign attention. Austria's Erste Bank and Steiermarkische Bank are controlling shareholders in three Croatian banks. The Austrian banks are merging Bjelovarska Banka in east Croatia, Cakovecka Banka in the north and Zagreb-based Trgovacka Banka. The result will be Erste Steiermarkische Bank, which will enter Croatia's top ten of banks by assets.
There are two main reasons for this consolidation. Foreign banks can provide investing institutions with with established brand names, customer loyalty and vital on the spot information.
RZB Bank in the eighth largest in Eastern Europe and has subsidiary branches throughtout the region. Hans Tamm, head of syndications, RZB London, sees local presence as very much an asset. He says: Our subsidiaries allow us to stay in close contact with the borrowers. When there is a problem, we can discuss it in person, rather than over the telephone. This offers a significant competitive advantage.