UniCredit SpA (UCG), the Italian lender that’s eastern Europe’s biggest bank, will continue to invest in the region, including by smaller acquisitions, said Gianni Franco Papa, the head of its eastern European business.
UniCredit, which leads Austria’s Raiffeisen Bank International AG (RBI) and Erste Group Bank AG (EBS) in the former communist part of Europe, bought a portfolio of Romanian assets from Royal Bank of Scotland Plc last year and could do more such deals if the possibility arises, Papa said in an interview yesterday at a Euromoney conference in Vienna.
“Last year, we bought a portfolio of assets in Romania -- we were monitoring the market, we spotted the occasion, and we did it,” Papa said. “If something pops up for which we believe there is the right price, the right quality of assets and if the activity where we want to expand is right for us, we will monitor and we will buy.”
Western European lenders, which own about three-quarters of banking assets in eastern Europe except Russia, have reduced investments in the region since it was hit by recession in 2009. Some have also sold assets in countries hit harder by the economic downturn or currency depreciation, including UniCredit itself, which last year sold its Kazakh bank ATF at a loss.
UniCredit, which also returned its banking licenses in the Baltics and merged its Czech and Slovak units last year, isn’t looking at further retrenchment in the region as its recovery is beginning to gain speed now, Papa said.
“The pickup is going to be everywhere,” Papa said. “Overall it’s a good picture for the region as a whole,” he said. Asked about plans to pull out of countries like Ukraine or Slovenia, where competitors like Raiffeisen scale back, he said: “For the time being, I think we’re done, we’re not looking at any further activity.”
Non-performing loans, which make up about 30 percent of banks’ loanbooks in countries like Romania or Ukraine, and about 20 percent in Hungary, according to UniCredit research, have been a drag on banks in the region since 2009. Papa said that they probably peaked last year and will decline to 11.5 percent of all loans in 2014.
“As the economies start growing and we will be able to grow our volumes, clearly we will have an improvement of the asset quality,” Papa said. “In many countries, we’re witnessing already an improvement of the asset quality.”
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