OTP Bank Nyrt, which spent $1.9 billion expanding in Eastern Europe, bought Moscow-based Investsberbank to enter its seventh market. Budapest-based OTP will spend $477 million to buy a 96.4% stake in Investsberbank, Russia's third-largest credit card issuer, Chairman Sándor Csányi said in a press conference in Moscow today. The bank plans to close the transaction in the third quarter.
Russia, with a population of 144 million, will be OTP's seventh market abroad as the bank tries to counter slowing growth at home amid tougher competition from rivals such as Austria's Erste Bank AG. The purchase comes after OTP in June paid €650 million ($818 million) for a Ukrainian unit of Raiffeisen International AG, the Hungarian bank's biggest-ever acquisition. OTP is also bidding for four other lenders as it wants to add to its holdings in Romania, Serbia, Slovakia and Ukraine. The company also has units in Bulgaria and Croatia.
The bank's net income rose by at least 20% in each of the past six years, to a record Ft 158 billion ($737 million) last year. The company increasingly relies on its units outside Hungary for earnings growth. OTP derived 10% of its first-quarter net income from its international businesses, compared with 8.2% a year earlier. Foreign banks meanwhile are seeking access to Russia's market to tap growing demand for financial products as the economy grows. Raiffeisen, based in Vienna and focusing on eastern Europe, became the biggest foreign bank in Russia when it bought Impexbank for as much as $550 million on Feb. 1. Four months earlier it paid $1 billion for Ukraine's Bank Aval. The $520 billion Russian economy is in its eighth straight year of growth, supported by a near-record price for oil, the country's largest source of income. The economy grew by 7.9% in the fourth quarter of last year and expanded an average 6.8% in the past six years. Hungary's $104 billion economy grew 4.6% in the first quarter and averaged 4.3% in the past six years. Economic growth will probably slow next year and in 2008 as the government cuts spending and raises taxes to slash the budget deficit, the highest in the EU at 8% of gross domestic product.