Erste acquisition of Novosadska banka is in line with management strategy to expand also in South East Europe. EB paid for a 83.3% stake EUR 73.2m, which corresponds to P/BV of 3.3. EB plans to invest other EUR 35m to 2008.Novosadska banka is a small bank, it has only a 2% mkt share, EB targets to increase it to 10% within 5 years.
EB plans to break even from the investment in 18 months and plans for Novosadska banka to reach a ROE of at least 20% by 2008.
At a first glance acquisition looks pricey, but it is a first step into a country with a great potential as banking assets/GDP ratio is approx. only 34% and loans/GDP ratio is 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.