MOSCOW. JULY 3. INTERFAX CENTRAL EUROPE - OTP Bank, Hungary's top bank, said on Monday that it plans to more than double its share on Russia's banking market to 1.5% in the medium term following the acquisition of Investsberbank, one of the top-50 banks in Russia.
"Investsberbank's market share in terms of total assets is around 0.6-0.7% at present, and we plan to increase this to 1.5% within three to four years," OTP Deputy CEO Laszlo Wolf told Interfax after a press conference in Moscow.
OTP, which will acquire a 96.4% stake in Investsberbank for EUR 373 mln (USD 477 mln) upon the transaction's close, expected in autumn 2006, said it was not satisfied with the Russian bank's current market share and planned expansion.
"We are not satisfied with the market share we have gained, thus we are planning either further acquisitions in Russia, or expanding the Investsberbank branch network to achieve our goals," OTP Chairman and CEO Sandor Csanyi told reporters.
OTP said it paid a fair price for the Russian bank, and expects to see a return within a decade.
"The purchase price for the bank will be four times book value, which I do not think can be called expensive in the current market environment. I think we paid a good, reasonable price, reflecting the great growth potential of the Russian banking market," said Csanyi.
He noted that growth in Russia is dynamic, the macroeconomic situation is excellent, with a surplus in the state budget, and risk is significantly lower than it was a few years ago.
"The bank's pre-tax profit is expected to reach USD 25-30 mln this year, and seeing its growth, we expect profits to rise by minimum 30% each year in the coming period. At this rate, we are poised to see a return within 8-10 years," Wolf told Interfax.
OTP said it plans to significantly increase Investsberbank's branch network, covering additional regions in the country.
"We plan to be present in every developed region in Russia, with expansion to begin in the Urals area, and the Krasnodar region (southern Russia). We will first cover the 30 large Russian cities with over half a million population in the medium term, and later, probably after 2010, might expand further down to cities with population of over 100,000," Csanyi told the press conference.
He added that OTP does not plan to take out any dividends from Investsberbank in the coming years, and will provide the capital needed for developments "to any extent." The three-year strategy for Russia will be completed by the end of the year, when management will be able to estimate the size of needed developments.
Wolf estimated the cost of setting up one branch at around USD 0.6-0.8 mln.
Csanyi said this is the seventh foreign country where OTP will operate, and the current transaction is the third-largest foreign acquisition it has carried out thus far.
"Profit growth and contribution to profits within the OTP group are expected to come increasingly from foreign subsidiaries in coming years," he said.
While Investsberbank is only the 35th-biggest bank in Russia, it is the third-biggest credit card issuer, and the fourth-largest point-of-sale lender, with over 1.5 million clients and 300,000 active credit card holders. It has 78 branches primarily around Moscow and Omsk, but is present in 70 regions and has 2,500 agents around the country. The group serves 30,000 corporate and 850,000 retail clients.
Its total assets, at EUR 980 mln at end-2005, are seen growing 60% this year, according to Csanyi.
Among planned developments, Wolf mentioned the launching of new consumer finance, mortgage lending and car financing products, as well as investments in electronic banking products.