Erste announced it will acquire an 83.3% stake in Novosadska banka in Serbia for EUR 73.2m, which corresponds to a P/BV of 3.3. EB plans to invest a further EUR 35m in the form of capital increases by 2009. Novosadska banka is a relatively small retail bank with assets worth EUR 132.3m, 260,000 clients and a market share of only 2%. However, the bank is the second largest player in Vojvodina, one of Serbia’s most prospering regions and the one with the closest economic and cultural ties to Austria and other CE countries. EB targets to increase the bank’s market share to 10% within 5 years. EB plans for Novosadska to break even by end-2006 with a ROE reaching at least 20% by 2008. The acquisition is also in line with the management’s strategy of expanding in South East Europe. At first glance the acquisition looks pricey, but it is a first step into a country with great potential, as banking assets to GDP stand at only approx. 34% and loans to GDP at around 20%. The news is positive for Erste Bank, as the main driver of the stock has been its successful track record in acquisitions, restructuring and integration of CEE banks into the EB group.
Separately, today is the payment date for a EUR 0.5 / share dividend. The record date for dividend payment was May 13.