Ukraine allows Alfa Bank owners to purchase Ukrsotsbank

The the National Bank of Ukraine (NBU) reported on Oct. 12 its board has granted the right to ABH Holdings (ABHH) to acquire Ukrsotsbank (USCB UK), Ukraine’s sixth largest bank by assets. A part of Russia’s Alfa Group, ABHH is the owner of Alfa Bank, ninth-largest by assets in Ukraine. The holding also operates banks in Russia, Belarus, Kazakhstan and the Netherlands. Before the approval, ABHH owners confirmed their intention to fulfill obligations that both banks have undertaken under recapitalization programs, the NBU reported. Recall, UniCredit Group announced in January its intention to swap its stake in Ukrsotsbank (99.8%) for a 9.9% stake in ABH Holdings.

Based on Alfa Group’s press release, the deal will “contribute to further development and consolidation of the financial sector” of Ukraine. “Another top-level player will appear in this sector, which will become a serious competitor in the market”, said the release, citing Tamara Savoshchenko, the board chairman of Ukrsotsbank.

Alexander Paraschiy: Based on Alfa’s comments, it looks like the group is aiming for a merger of Ukrsotsbank with Alfa Bank. This will create Ukraine’s fourth-largest bank by assets (compnied the two banks had 7.4% of the system’s assets as of end-1H16) and increase concentration in Ukraine’s banking sector. The newly combined bank could become another “systemically important bank” (in addition to state Oschadbank, Ukreximbank and private Privatbank).

At this stage, we do not expect significant changes on the market with the appearance of “another top-level player,” though it may happen that the central bank will obtain another headache with another “too big to fail” systemic bank. Both, Alfa Bank and Ukrsotsbank, have yet to implement their recapitalization programs, and it’s unlikely that their possible merger will speed up this process.

Ukraine’s legislation obliges the new owner of Ukrsotsbank to offer to purchase shares from minority shareholders within 20 days of the date of large stake’s acquisition. The purchase price should be no less than the market price of shares prior to the day of acquisition. Based on the legislation, the market price of exchange-listed shares is determined by the stock exchange (the so-called exchange rate of shares). If the exchange rate is not available for the last three months (currently, there is no such price for USCB shares), the price is determined by an independent appraiser.