OTP Bank Nyrt.'s acquisition of Alpha Services and Holdings SA's Albanian unit is the latest step in the Hungary-based bank's aggressive expansion strategy in central and Eastern Europe.
The deal values Alpha Bank Albania SHA at €55 million, or a price-to-book ratio of 0.74x. Alpha Bank Albania is the eighth largest lender in the country with a 5% share by assets, OTP said.
This could be OTP's third banking acquisition of the year. In May, it agreed to acquire Nova Kreditna Banka Maribor dd from private equity firm Apollo Global Management and the European Bank for Reconstruction and Development. It has also signed a nonbinding memorandum of agreement with Uzbekistan's finance ministry to buy Ipoteka-Bank Toshkent Sh, the country's fifth-largest lender. The bank expects to finalize the terms of the deal by the end of 2021.
OTP's acquisition drive began in 2014 when it stated its aim "to become the most successful universal banking group in Central and Eastern Europe." The group is making progress on a relatively small investment in China, Laszlo Bencsik, deputy CEO and chief strategy and finance officer, said during a November earnings call. He added that OTP continues to look at acquisition opportunities in Russia in response to reports that it is considering a deal for PPF Group NV's Russia-based Home Credit & Finance Bank LLC.
The bank has a broad and growing presence across the CEE region. Hungary is its biggest market, accounting for 37% of its loan book on a pro forma basis during the third quarter, followed by Bulgaria, Croatia and Serbia.
Its market share in Slovenia could rise to almost 30% through the Nova KBM acquisition, while the entity that will be created from the Albanian acquisition is expected to have a market share of around 11% in the country.
The M&A strategy has helped OTP accelerate asset growth, from 11 billion Hungarian forints in 2014 to 22.7 billion forints in the most recent quarter, S&P Global Market Intelligence data shows. For the first nine months of 2021, the group's operating costs rose 6.1% year over year, but that was offset by a 12% increase in total income, with most of the subsidiaries' profit after tax improving on a quarterly basis.
For Greece-based Alpha, the deal forms part of its efforts to boost its capital and maintain a level above minimum requirements. The bank has made disposing nonperforming exposures a priority, with the latest sale struck in October and more expected imminently.
Alpha said in its third-quarter earnings report that it expected to achieve a risk-weighted asset relief of €400 million from the sale of the Albanian unit. It was advised on the deal by Rothschild & Co, UniCredit, White & Case and Kalo & Associates.
As of Dec. 8, US$1 was equivalent to 323.17 Hungarian forints.