Saturday, 5 October 2013

Italy’s Unicredit looks to unload Ukrainian assets

Ukraine’s second largest Western lender, Unicredit SpA, said it is seeking a buyer for its assets in the country, including its locally-owned bank Ukrsotsbank, reported Bloomberg. “We are testing the market for our Ukrainian assets,” said Unicredit Chief Executive Officer Federico Ghizzoni. “We will see if we will find counterparties.” The Milan-based bank had €3.9 billion of risk-weighted assets in Ukraine at the end of June, making it the second largest Western lender in the country after Raiffeisen Bank International AG, according to Bloomberg. Ukrsotsbank is the nation’s sixth largest by assets. Police on Sept. 20 shut down the bank’s main office in Kyiv as part of an investigation into property embezzlement connected to a longstanding yet still unsettled dispute with a debtor. Property developer ISA Prime Development Group took out a $190 million loan in 2005 – before Unicredit bought Ukrsotsbank – to build office buildings in Kyiv but never repaid the debt. In turn, ISA Prime Development Group accused the bank of trying to take over its real estate. Western banks exiting Ukraine Once one of the fastest growing in Europe until the onset of the global financial crisis, Ukraine’s banking system has since contracted. Total loans were 58 percent of gross domestic product in 2012, down from 77 percent in 2008, according to Raiffeisen research. According to the central bank, the share of foreign capital in Ukraine's banking system was 33.8 percent as of August, down from close to 50 percent in 2008. In addition, the banking sector reported losses from 2009 through 2011. Unicredit’s announcement marks the latest foreign bank’s move to exit Ukraine. It comes on the heels of Commerzbank, Erste, Swedbank and Alpha Bank. “All in all, we estimate Unicredit has spent some $2.4 billion on its Ukrainian unit (acquisition price of $2.1 billion and $300 million on share capital injections) without taking into account investments into business development and alignment with parent group standards,” Kyiv-based Dragon Capital wrote in a note to investors. “With recent domestic bank acquisitions reported at below book value, it will be difficult for Unicredit to exit without losses, which leaves open the prospect of the sale being shelved or dropped altogether.”

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