Erste Bank will launch a 2.4bn-euro capital increase in the coming days, an operation that is necessary for the bank to finance the acquisition of Banca Comerciala Romana (Romanian Commercial Bank – BCR), through the biggest stock issue in the history of Vienna Stock Exchange, reads the Handelsblatt German daily.
According to banking sources quoted by Handelsblatt, Erste Bank”s chairman, Andreas Treichl, wants to seize the favourable market conditions, in order to complete the share capital raise this month.
The issue of new stock, worth 2.4 billion euros, is a new record for the Vienna market. The funds to be raised will be used by Erste to pay the 3.75bn-euro price for the 62% stake in BCR.
Market conditions are favourable, as the Austrian bank”s stock has reached an all-time high of 48 euros/share. The value of the stock has gained 10% since December 20th, when Erste was designated as the winner in the race for BCR, and the market is expecting further gains.
Analysts feel the price paid for BCR is quite high, given that it is six times the accounting value of stock.
On the other hand, BCR has been the last major bank privatised in Eastern Europe, and, in a single move, Erste Bank gained 4.5 million customers, raising the number of its clients to 17 million, Handelsblatt shows.
“Erste had paid prices deemed as high for various acquisitions before, but they all have proved profitable,” says Stefan Maxian, an analyst with Raiffeisen Centralbank.
At the same time, the takeover of BCR is expected to boost estimates regarding the average income growth pace, from 15% to 20% by 2009. Dividends will rise by at least 10%.
Handelsblatt outlines that Romania is a market “of the future”, where only a quarter of the population owns a banking account, and the lending activity is just taking off. BCR holds a 26.7% market share, with assets worth 7.7 billion euros.
Banca Comerciala Romana in the first 11 months of 2005 derived net income standing at 762 million RON (211 million euros), in line with the bank”s data.
Since 2000, Erste Bank has bought five lending institutions in the region, in the Czech Republic, Slovakia, Croatia, Hungary and Serbia, for about 2.5 billion euros.