An Austro-Hungarian Banking Empire In Ukraine?

According to Sergey Buryak, the head of the Rada committee on financial and banking activity, Hungary’s OTP Bank signed an agreement to buy a 100% stake in Raiffeisen-Ukraine (Raiffeisen’s subsidiary in Ukraine) for USD 500 mln. Concorde Capital: If we use the bank’s reported book value for 2005, USD 124 mln, this would translate into P/B of 4.0. However, considering the higher book value from the results of 1Q06, this could imply ~x 3.5 P/B. In our view the deal price corresponds to the bank’s fair value. We also believe Raiffaisenabank’ (RBU) sale will positively effect Bank Aval’s performance: 1) the sale eliminates the costly merger procedure; 2) Raiffeisen will concentrate all efforts on Aval’s transformation into a large Western-style bank; 3) USD 500 mln is expected to be directed towards the improvement of Aval Bank’s banking operations.