The French banking group Société Générale (SG) is putting on sale its business in Central and Eastern Europe. The Bulgarian bank is offered in a package with five other units – in Albania, Macedonia, Montenegro, Serbia, and Moldova. The Hungarian OTP Bank, owner of DSK Bank, is currently conducting due diligence. According to Capital media, an indicative offer for the bundle was also submitted at the end of February by a fund of the American asset manager Apollo Global Management.
Well managed and profitable, all SG units suffer from similar shortcomings: small and saturated markets and dwindling profitability. Analysts expect the transaction price for Expressbank to be above the book value of equity (BGN 760 M (ca. €380 M) in 2017), due to the quality of the portfolio, the strong market position and the sustained growth in mortgage lending.
For OTP, the acquisition would help increase its share in corporate lending. Upon merger, OTP would be brought nearer to UniCredit Bulbank in terms of assets, which has nearly 20% market share. In Bulgaria, DSK Bank is said to be interested in virtually every deal in the sector: in 2013 it considered the acquisition of Unionbank (sold to FIBank), in 2017 it narrowly lost to KBC in its bid for NBG subsidiary United Bulgarian Bank (UBB) and is also rumoured to be interested in Piraeus Bank.
The US fund Apollo Global Management has been active on the Bulgarian market – it was one of the candidates to acquire UBB, negotiated a portfolio of non-performing corporate loans from Postbank, reviewed the Balkan business of withdrawing Norwegian telecom operator Telenor, is interested in acquiring Piraeus Bank, and also considered an investment in First Investment Bank, the No. 4 lender in Bulgaria. The fund managed $248 Bn as of 2017. Apollo’s profile leans more toward investing in undervalued banks, restructuring them and exiting in the medium term. SG’s Eastern Europe business does not fall into this category, and a strategic investor is likely to pay a better price for Expressbank.
