site.btaKBC Group Acquires United Bulgarian Bank and Interlease

KBC Group Acquires United Bulgarian Bank and Interlease

Brussels/Sofia, January 4 (BTA) - Belgian-based KBC Group (KBC) and the National Bank of Greece (NBG), the Greek parent company of United Bulgarian Bank (UBB), reached agreement for KBC to acquire ownership of UBB (99.9 per cent) and Interlease (100 per cent) for a total consideration of 610 million euro, KBC Group said on its website on December 30.

UBB is the fourth-largest bank in Bulgaria in terms of assets with an 8 per cent market share as at the end of September 2016 (11 per cent market share in retail, 8 per cent market share in corporate).

Interlease is the third-largest provider of leasing services in Bulgaria with a 13 per cent market share.

Before closing of the transaction, UBB intends to make a 183-million-euro extraordinary dividend payment to NBG subject to authorisation from the Bulgarian National Bank (BNB).

KBC has been present in the Bulgarian banking sector since 2007 through its subsidiary CIBANK. The combination of UBB and CIBANK will result in the creation of the third-largest banking group in Bulgaria in terms of assets, with a market share of approximately 11 per cent. KBC has also been present in the Bulgarian insurance sector through its subsidiary DZI Insurance, active in both life and non-life insurance. Together, UBB-CIBANK and DZI will become the largest bank-insurance group in Bulgaria.

Closing of the transaction is subject to regulatory approval from the BNB and Bulgaria's Financial Supervision Commission, authorisation by the National Bank of Belgium, the European Central Bank and anti-trust approval.

The parties involved in the transaction expect the deal to close during the second quarter of 2017 at the latest.

KBC's press release also contains a brief analysis of Bulgaria's financial and economic prospects.

Bulgaria is a mid-sized market in South-East Europe with 7.4 million inhabitants. Over the past few years it has experienced a higher economic/GDP growth compared to KBC's main core markets of Belgium and Czech Republic. A higher level of GDP growth is expected to be sustained in the coming years (3.7 per cent on average, compared with an expected 1.5 per cent in the EU in 2017-2019).

Bulgaria benefits from EU membership (it has been a member since 1 January 2007) and close cooperation with the EU (two-thirds of its exports go to the EU, and it benefits from structured funds and foreign direct investment). Since 1997, the Bulgarian lev has been pegged to the euro. Bulgaria's prudent fiscal policy has resulted in a low public debt ratio (estimated at 28 per cent of GDP in 2016), and a budget surplus.

Similar to other Central and Eastern European markets, the Bulgarian banking sector is currently underpenetrated, as illustrated by an assets/GDP ratio as of 2015 of 107 per cent compared with an average of 345 per cent for a group of European countries. Bulgarian banks are primarily owned by foreign, international financial institutions. Concentration in the Bulgarian banking sector is still very low but has started increasing, with the top five banks holding approximately 60 per cent of the market in loans and deposits.

The underpenetration of the banking sector, coupled with higher-than-expected economic growth, is expected to become one of the key drivers behind the high growth of the Bulgarian market which will become increasingly important for KBC Group.