Hungary’s OTP Bank has agreed to buy a 99.74% stake in the Bulgarian unit and an 88.89% shareholding in the Albanian unit of France's Societe Generale Group, it was announced on August 2, confirming media reports from Wednesday.
The deal fits well with the strategy of OTP, which has set foreign expansion as a key priority. It plans to expand in the Central and Southeast European markets where it is already present but has a small market share. OTP’s management did not rule out entering new markets. The bank's liquidity reserves at €8bn would provide enough room for that.
Chairman-CEO Sandor Csanyi has said that OTP would even consider financing acquisitions at the expense of dividend payments, but shareholders nevertheless can expect to receive dividends after record earnings in 2017.
OTP will make the acquisition in Bulgaria through its local unit DSK Bank, the country's second-biggest bank. Societe Generale Expressbank has a market share of about 6.7%, making it Bulgaria's seventh-biggest bank.
The Hungarian lender will further strengthen its market position in Bulgaria and boost its market share to 19% after the acquisition. UniCredit is the largest lender on the market with a 19.5% share.
OTP entered the Bulgarian market in 2003 by buying DSK, which has become the most profitable foreign subsidiary of the Hungarian banking group with HUF47bn profits in 2017, accounting for 16% of OTP’s total earnings. Foreign units are playing an increasing role as they generated 40% of consolidated profits at the group level.
DSK Bank had total assets of about BGN12.4bn at the end of 2017. Societe Generale Expressbank had total assets of around BGN7bn (€3.57bn) last year and generated BGN106.7mn in profit. It operates 140 branches, employs 1,600 staff and serves some half a million customers.
In a separate disclosure, OTP said it agreed to acquire an 88.89% stake in Banka Societe Generale Albania, the country’s fifth-largest bank with a market share of 6%.
Albania will be OTP’s ninth foreign market. Hungary’s largest bank has subsidiaries in Serbia, Croatia, Slovakia, Bulgaria, Ukraine, Russia, Montenegro, and Romania. OTP acquired its Croatian unit, Splitska Banka from Societe Generale in 2016.
OTP expects to close both transactions in 4Q18, pending regulatory approval.
In addition to these transactions, OTP said it is in talks with the French lender on entering into a services agreement on providing mutual services in Albania, Bulgaria, Croatia and Hungary. These services would include investment banking, capital markets, financing and global transaction banking.