What VeloBank and OTP Romania’s sales say about CEE banking
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What VeloBank and OTP Romania’s sales say about CEE banking

Despite the cross-border growth of Hungary’s OTP Bank and the regional potential of Romania’s Banca Transilvania, banking in central and eastern Europe is increasingly a national game.

Dominic O'Neill on Europe 1920px.jpg

This year’s auctions of OTP Bank Romania and Polish lender VeloBank say much about the state of international banking today in central and eastern Europe (CEE).

Both are top-10 lenders in their respective countries. Moreover, the ostracization of Russia and the riskier political environment in Turkey have increased the importance of Poland and Romania to international banks in this region.

But developed-market banks are still taking an extremely cautious approach to international business, despite enjoying a stronger capital position than over the past decade. This is also despite the relative stability of EU countries such as Poland and Romania, and higher returns outside the eurozone. Management teams are using excess capital to buy back shares, rather than explore acquisitions.

Local press suggests that Erste and UniCredit have pulled out of bidding for OTP Romania. The potential deal demonstrates how even regionally headquartered banks – such as Hungary’s OTP – face barriers to international expansion.

Sandor Csanyi, OTP
Sándor Csányi, group chief executive of OTP

In Poland, the VeloBank sale could add to the growing dominance of local state-owned banks after the shift of Alior Bank and former UniCredit subsidiary Pekao into state ownership after 2015, when the nationalist PiS party came to power.

In 2021, Pekao was the buyer for the last notable bank M&A deal in Poland: which involved Idea Bank, previously controlled by Leszek Czarnecki, who also previously controlled Getin Noble. That’s not just because of the ruling party’s preferences and the state-led nature of the sales – deposit guarantee fund BGF is VeloBank’s majority owner; the PiS government has increased the hesitancy of Western banking groups to buy Polish banks, most recently by forcing local banks to offer everyone free mortgage holidays.

Tried and failed

Elsewhere in CEE, OTP has to some extent taken over the mantle of Austria’s Raiffeisen Bank International (RBI) in terms of its expansion in less-developed markets during the past five years. This year, it entered Central Asia with the purchase of Ipoteka Bank from the government of Uzbekistan.

However, compared with Raiffeisen in the 1990s and 2000s, the range of countries that would welcome OTP becoming a bigger player seems more limited. OTP sold its small Slovakian bank to Belgium’s KBC in 2020, despite this being OTP’s oldest international bank. It has also tried and failed to bulk up through acquisitions in Romania, triggering this year’s sale of its bank there.

In 2018, the Romania central bank overruled OTP’s agreement to buy Banca Românească from National Bank of Greece. State-owned EximBank was the eventual buyer. Bankers say OTP’s other attempts to buy exiting eurozone lenders in Romania didn’t even get that far. Many suspect a tacit anti-Hungarian bias.

An OTP purchase will only add to the longer-term question of what else BT can do in its home market

Now national champion Banca Transilvania (BT) is rumoured to be among the bidders for OTP’s Romanian business, and perhaps the most likely candidate. Market rumours suggest RBI is another possibility, although this might be through an asset swap involving RBI businesses in the western Balkans, according to one source.

Since the 2008 crisis, local banking sector domination by foreign banks has been a concern for all former communist EU countries, yet Romania is understood to have remained more welcoming than Poland. It has not cheered the growth of local state-owned lenders in the same way as Poland or Hungary have done – in the latter’s case, through the three-way merger in 2020 of state-owned Budapest Bank, MKB Bank and Takarekbank. 

BT, a post-communist creation, is privately owned. Its headquarters are in the provisional city of Cluj-Napoca, helping it operate at arm’s length from the state. Even in Romania, however, a strong local lender such as BT may be better able to argue to the authorities about why it would be a suitable buyer.

Hungary’s prime minister Viktor Orbán. Photo: Reuters

OTP, Hungary’s biggest bank, is not state owned, either. Its international expansion may well have happened under a more liberal government, given developed-market owners such as France’s Societe Generale were looking to exit. While prime minister Viktor Orbán no doubt feels that OTP’s regional prestige rubs off on him, OTP’s international expansion under chairman and chief executive Sándor Csányi in fact serves to diversify the business away from Hungary.


But Hungarian foreign policy may, on occasions, impact OTP.

In virulently anti-Russian Poland, Orbán’s lukewarm support for Ukraine would not help if it was to try to buy VeloBank. Hungary has threatened to block EU military aid to Ukraine and EU sanctions against Russia unless Ukraine takes OTP off a list of war sponsors, due to its presence in Russia. On the other hand, Orbán has relatively warm relations with countries such as Serbia and has pushed the EU to speed up the accession of western Balkan states, where OTP has won important market shares.

Meanwhile, partly through acquisitions, BT has grown rapidly to become Romania’s biggest bank – tapping the international bond market for the first time in April.

Banca Transilvania chief executive Ömer Tetik

But an OTP purchase will only add to the longer-term question of what else BT can do in its home market. BT has not grown regionally except for Moldova – notably bolstered last year with the acquisition of Erste’s tiny Moldovan bank. Perhaps that partly speaks to the diminutive economic and political influence of Romania in southeast Europe.

Hungarian companies such as Gedeon Richter and MOL, as well as OTP, have expanded regionally, and Hungary has a more developed banking sector than Romania. For BT chief executive Ömer Tetik, the failure of Greek banks’ expansion in southeast Europe in the 2000s might only add to the arguments of focusing on broadening its business inside Romania, including in corporate banking.

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