Serbia has become the focus of attention for Greek banks seeking to consolidate a regional franchise in southeast Europe.
Accelerating economic growth in the region, fuelling consumer spending, and the prospect of closer integration with the European Union have whetted the appetite of Athens-based banks for acquisitions – in spite of strong competition from Austrian and Italian rivals.
Country fact file
The Greek banking market is still some way from maturity, with household lending at around 40 per cent of gross domestic product – less than half the eurozone average. But as the pace of domestic credit expansion starts to slow, the emerging markets of south-east Europe are increasingly seen as an opportunity.
Greece’s leading banks followed their corporate customers into Bulgaria and Romania in the early 1990s, first setting up branch operations, then making acquisitions. Similar but smaller investments, were made in Albania and Macedonia.
Serbia has attracted €300m of the Greek banks’ €750m investment to date in southeast Europe, according to Athens-based Alpha Bank.
Alpha this year doubled its branch network in the region by acquiring Jubanka, a state owned bank for sale under Serbia’s privatisation programme.
It paid €159m for 89 per cent of Jubanka – 1.5 times book value – and agreed to buy the other 11 per cent from small shareholders. It also undertook not to dismiss any of Jubanka’s 1,300 employees for three years.
Alpha had launched the Greek banks’ drive into the Balkans in the early 1990s by setting up a bank in Romania in partnership with the European Bank for Reconstruction and Development but was lagging in the race to build a regional network.
Marinos Yannopoulos, Alpha’s general manager, says the bank’s strategy has changed. “We’re looking at any and every opportunity in the region. We plan to be aggressive in terms of organic growth as well as pursuing acquisitions.”
Serbia is expected to catch up fast. Bank deposits increased two-thirds last year while lending doubled although from a low base.
Spyros Filaretos, Alpha’s head of regional operations, says: “With Jubanka we have a window of opportunity in the next one or two years before competition gets very intense.”
The balance sheet is stronger than it appears, thanks to what Mr Filaretos calls “hidden deposits” equivalent to about €250m. These take the form of 10 year bonds issued by the government to replace about €4.5bn in foreign currency deposits siphoned off by the Milesovic regime to finance the 1990s Bosnian war.
EFG Eurobank, controlled by the Swiss-based Latsis group, has a target of raising the contribution of its southeast European subsidiaries from 5 to 20 per cent of group income by 2009.
Following the acquisition two years ago of Posta Banka, a small Serbian bank that was renamed EFG Eurobank Belgrade, EFG has been trying to accelerate its expansion by making another acquisition. But it has lost out after being shortlisted twice in privatisation deals. Meanwhile it is investing €40m in its Serbian subsidiary to increase the network to 15 branches.
“We’re looking at every possibility. Serbia is growing rapidly and political stability is much improved. We’re optimistic that it’s going to catch up quickly and we intend to compete aggressively,” says Nikos Nanopoulos, EFG chief executive.
National Bank of Greece, the biggest Greek financial investor in the region with a network of more than 230 branches, initially opted to grow organically in Serbia. Its network is set to grow this year from 15 to 30 branches.
New senior managers are in place and operations have been restructured with the aim of accelerating growth in retail lending.
But NBG has changed its strategy as competition for market share heats up.
“Our network’s developing nicely,” says Yiannis Pehlivanidis, NBG’s deputy chief executive. “But we’re definitely interested in bidding in the next round of bank privatisation.”
