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Public relations section
Raiffeisen International Bank-Holding AG (Raiffeisen International) has closed the acquisition of Joint Stock Post Pension Bank Aval (Bank Aval), the second-largest bank in Ukraine, as scheduled. All necessary approvals by the anti-monopoly authorities and the National Banks in Ukraine and Austria were obtained. The purchase price for the 93.5 per cent stake was USD 1.028 billion.
"Bank Aval is the leading retail bank in Ukraine. It fits perfectly into our strategy with its superior position in the retail business", said Herbert Stepic, CEO of Raiffeisen International, at a news conference in Kiev. Not only is the acquisition a milestone in Raiffeisen International's history, but also a positive signal to international investors with interesed in Ukraine. Raiffeisen International intends to grow above all in retail banking and the countries of the CIS.
Bank Aval operates a country-wide network of 1,400 business outlets and serves more than 3 million customers, increasing Raiffeisen International’s number of branches to 2,400 and the number of customers to 9.2 million in Central and Eastern European (CEE).
Number 1 in growth market
"This acquisition makes us the leading bank in Ukraine, one of the most promising banking markets in the growth region of Central and Eastern Europe", Stepic added. Together, Bank Aval and Raiffeisenbank reach a market share 11.5 per cent by total assets, forming the largest banking group in this market of 50 million people. The banking market in Ukraine grows significantly: In 2004, the local banks' aggregated total assets increased by 30 per cent to € 19.6 billion.
The Ukrainian banking market is expected to continue to expand strongly, especially in the retail business. Rising incomes and therefore increasing prosperity will pave the way for products that are only marginally present in Ukraine today. According to current research, the credit card business should grow by 38 per cent per year until 2010, which would result in a market almost seven times larger by then. Auto loans should increase by 34 per cent and mortgage financing even by 56 per cent per year.
Integration main task for next year
"For the next one or two years, the integration of Bank Aval will be our main task", Stepic said. The transformation phase is scheduled for 18 to 24 months. During this time, back office functions will be bundled step-by-step and IT-systems will be harmonized. "For the time being, both banks will concentrate on their respective strengths – Raiffeisenbank on the corporate business and Bank Aval on the retail business. We consider a full merger not earlier than 2007 or 2008", Stepic emphasized.
The anticipated cost-synergy effects will amount to € 5 million per year from 2008 onwards. "Our primary reason for this acquisition was not cost-synergy. Our reasons are the strong market position of Bank Aval, the superior distribution network and the good economic performance", Stepic explained.
Bank Aval and Raiffeisenbank with remarkable image values
In a survey conducted by the Center of Corporate Relations Studies in Kiev in July 2005, Bank Aval and Raiffeisenbank were attested remarkable trust values. Both banks lead the way with 75 per cent attributing trust to both banks. Another study conducted by Gesellschaft für Konsumforschung (GfK) on brand awareness in spring 2005, shows Bank Aval as the most popular banking brand in Ukraine. It reached remarkable values of more than 60 per cent in unaided recognition and almost 90 per cent in aided recognition.
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JSPP Bank Aval, Kiev was founded in 1992. At year-end 2004, its balance sheet-total amounted to € 1,573 million and the profit before tax reached € 38 million. Return on Equity was 32.6 per cent. The bank operated some 1,380 business outlets with approximately 17,950 employees at the balance-sheet date.
Raiffeisen International is in charge of steering the subsidiaries of Raiffeisen Zentralbank Österreich AG (RZB) in CEE. Its shares are traded on the Vienna Stock Exchange. RZB owns 70 per cent. The balance is free-float, including shareholdings of the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) of about three per cent each. Raiffeisen International operates the leading banking network in CEE with 16 subsidiary banks and numerous leasing companies in 16 markets. 9.2 million customers are served via almost 2,400 business outlets (figures including recently acquired Ukrainian Bank Aval).
Raiffeisen International's balance-sheet total amounted to € 32.9 billion at the end of June 2005, which was 14 per cent more than at year-end 2004. Pre-tax profit for the first semester was € 273.3 million, 58 per cent more than for the same period of the previous year.