OTP Bank, Hungary's biggest lender, was contemplating selling its Ukrainian arm to Russia's state-controlled Sberbank, a source familiar with the situation told DealWatch on Wednesday.
"In the beginning of this year, OTP was in discussions with Sberbank about a possible sale of OTP Ukraine," DW cited the banking source as saying.
At present, the negotiations between the parties are believed to have stalled, it added.
Last month, Sberbank announced it may issue up to 15 billion new common shares as early as in the second half of 2009, which would raise around USD 25 bn should the placement happen at the current market price, DealWatch pointed out.
Analysts believe that Russia's biggest bank could use the new share issue to cope with soaring bad loans and possibly to finance acquisitions.
Sberbank has been in talks over the possible acquisition of Kazakhstan's largest bank BTA since February.
A “link" between OTP and Sberbank was not secret in Hungary. Rumour had it earlier this year that the Russian giant would not stop at OTP's eastern units and could have set its crosshair on the parent bank itself. This deal, however, has gotten as far from reality as possible since the surfacing of such gossip. OTP's shield against any unwanted takeover has been fortified by a rise in its share price, an imminent loan agreement with the European Bank for Reconstruction and Development (EBRD), measures by the government to help local banks and the amelioration of the global environment. Moreover, these have lifted the threat of forced liquidations from above OTP's head.
No doubt, CJSC OTP Bank is the weakest link in the OTP family. OTP took it over from Austria's Raiffeisen International for EUR 650 m in 2006 and the question is not how it would achieve a return on this investment and subsequent capital increases but how the parent bank would rid of the burden of financing the subsidiary. (Note that the loan/deposit ratio at the Ukrainian arm is well over 400%.)
OTP's management expect its Kiev-based unit, the ninth largest bank in the country, to break even this year after it incurred a net loss of USD 44.5 m in the first quarter. OTP Ukraine had assets of UAH 24.7 bn (USD 4.7 bn) as of 1 October, 2008, according to central bank data.
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