Foreign banks increase their presence on Moldovan market. Info-Prim Neo Comment

The foreign banks which activate in Moldova doubled their presence on the market in 2006 (January-July), holding a share of 10.41% (over MDL 2 bln) of the total assets of the banking system (over MDL 20 bln). 2006 could be characterized as a year when a new development and reorganization stage began - the market is more open to foreign financial institutions and foreign investors are more interested in the Moldovan banking system. Compared with the previous stage 1999-2000 (at that time several foreign banks were working in Moldova: with Turkish capital – BTR Moldova, Romanian – BankCoop, Greek – ICB, but because of the problems of the mother-banks or because the local market was not attractive, they did not strike roots in Moldova), the present stage looks irreversible and promises structural and qualitative changes in the banking system. More exactly, Moldova is aligning, though with a little delay, with the regional strengthening process of the banking system through extension of the international and regional groups, growth of the quality level and the number of provided services. In a relatively short period a series of events which could significantly influence the future evolution of the banking system happened. [Austrian capital, on its way to Moldova] On one hand, on January 31, 2006, Raiffeisen International group by means of its Bucharest subsidiary (Raffeisen Bank Romania) opened its subsidiary in Chisinau (Raiffeisen Bank Subsidiary in Moldova). The new subsidiary does not have a banking license, but it announced that in 1-1.5 years it could obtain it, all the more as the group is already present on the neighbor markets – Ukraine, Russia, Romania. At present, the option of the group is not known – whether it will begin its activity from a zero point or it will buy a local bank. As regards the latter, the state, directly or indirectly, already announced about a series of opportunities: privatizing the share it holds in EuroCreditBank (22.7% of the shares) and privatizing the Banca de Economii (56.13% of the shares). Banca de Economii is the second biggest bank in Moldova, with assets amounting to about USD 3.6 bln by June 30, 2006. It is worth mentioning that Raiffeisen International Group is Europe’s fourth biggest bank which activates in the Central and Eastern Europe, with assets amounting to EUR 42.3 bln and net profit of EUR 481 mln at the end of 2005. On the other hand, on May 15, 2006, it was concluded the biggest transaction on purchasing a local bank by a foreign one – the Italian group Veneto Banca purchased the stock of Eximbank. Although the value of the transaction was not made public, according to the estimations, it could reach to USD 15 mln. Recently, at a meeting with the president Vladimir Voronin, the chairman of the Administration Council of Veneto Banco, Flavio Trinca mentioned that in the near future the range of products and services will be qualitatively and quantitatively increased. On June 22, the Extraordinary General Assembly of Eximbak decided to increase the social capital of the bank by almost EUR 9 mln (MDL 150 mln) and to solicit the NBM the C type license – the highest-ranking banking license. Third. At the beginning of August the Russian bank Petrocommert (central bank of Lukoil Group), relatively passive until now on the Moldovan market, announced about a record investment in its subsidiary in Chisinau, Unibank – USD 5 mln (MDL 66.5 mln). So the statutory capital of Unbank will be doubled, fact which will allow an important increase of the 1st degree capital and subsequently obtaining the C type license, which offers the right to perform all the range of operations stipulated by the legislation. Four. This year, until October, the region’s second banking group – Erste Bank will finish the privatization process of the Banca Comerciala Romana and respectively of BCR Chisinau, which is one of the most dynamic banks as regards the growth pace of assets and profit. By the end of June 2006, BCR held assets to the total sum of MDL 486.64 mln, by 2.5-fold more compared with the similar period of 2005. At the same time, the bank’s profit increased 4-fold and topped MDL 12.38 mln. Erste Bank is on the second place in the top of the biggest banks which activate in the Central and Eastern European region, with assets amounting to EUR 48.7 bln and with a net profit of EUR 711 mln at the end of 2005. [Animation on the Eastern banking front] Five. The latest slight warm-up of the Moldovan-Russian relations (the recent meeting of the president Vladimir Voronin and Vladimir Putin) could enliven relations on the banking segment. The last year, the state bank Vnestorgbank, the Russian Federation’s second biggest bank tried to enter the Moldovan market through the United Bank of Georgia where it holds the majority stock, but this attempt was unsuccessful. At that time the Russian bank tried to buy the bankrupt Businessbank, but taking into consideration the tensioned relations between Moscow and Chisinau, the transaction failed. However, taking into account the declared intention of Vnestorgbank to expand in the CIS space, especially Georgia, Armenia, Ukraine and Moldova, we could expect for new projects coming from Russian financial institutions. Previously, similar intentions were announced by an important bank from Kazakhstan. In this way, the latest evolutions show that concurrence is increasing on the Moldovan banking market, which surely enters a converging process, including through foreign banking groups. We may precisely say that in 2006-2008, the share of foreign banks on the Moldovan market could reach 30-40%, and maybe more. It is worth mentioning that in 2005, the share of foreign banks in the Central and Eastern Europe (excepting Russia and Turkey) constituted 78%.