July 28 (SeeNews) - Hungary's OTP Bank should target a 7-8% market share on the Serbian market in order to achieve good profitability levels, the bank’s chief financial officer (CFO) said.
“Taking into account the size of the country, the economy’s long-term potential and its yet not so developed financial intermediary industry, I would say that an international group of OTP’s stature should aim to reach a 7-8% market share in order to ensure satisfying profitability with stable clientele and cost-efficient operations,” Csaba Gabor Fenyvesi said in an interview with SeeNews.
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Considering OTP’s current market share in Serbia, this may seem to be an ambitious goal, but it is an achievable one in the long term, especially in view of the ongoing restructuring and intensifying consolidation of the market, Fenyvesi went on to say.
In June, OTP Banka Srbija signed an agreement with Italian specialist bank Findomestic Banca to acquire 100% of Serbia's Findomestic Banka.
OTP said at the time that the transaction will increase OTP Banka Srbija’s market share from 1.4% to 1.9%.
Findomestic Banka is a retail-oriented bank, which ranks 21st on the Serbian banking market with a 0.5% market share. The national network of Findomestic Banka consists of 26 branches, seven of them located in Belgrade, and the total number of its customers is close to 90,000.
Explaining the business rationale behind the move to acquire Findomestic Banka, Fenyvesi said that the lender has gone through an extensive and very successful turnaround phase and as a result, its capital position is one of the best in the market, its NPL ratio has been steadily decreasing while its productivity and profitability are constantly increasing.
“However, the bank has a potential to benefit from gains on economies of scale both in terms of cost efficiency as well as revenue-generation. Therefore, we have actively assessed some acquisition opportunities which may help us to shorten our convergence to an above market average cost-efficiency and to improve our economies of scale.”
OTP Bank remains open both to options for organic growth and for growth by acquisition in order to achieve its long-term goals in the most effective way.
“We have an ambitious mid-term plan based on organic growth and the integration of Findomestic Banka which is subject to approvals of the supervisory authorities, but we are ready to alter that any time should a suitable acquisition target emerge,” Fenyvesi also said.
OTP Banka Srbija plans to merge Findomestic Banka into its organisation and hopes that this could be achieved in the first half of 2016, should it receive the necessary approvals from regulatory bodies.
SERBIA'S BANKING MARKET FACES FURTHER CONSOLIDATION DURING NEXT 2-3 YRS
Fenyvesi also said he expects significant further consolidation of the Serbian banking market during the next 2-3 years.
“I consider the market penetration somewhat below the level which would be consistent with the development level of its economy in terms of total asset to GDP,” he noted. “As existing, traditional players can more easily benefit from efficiency gains of add-on businesses, I would rather expect them to remain the driving force behind consolidation.”
According to Fenyvesi, the market shares of some of Serbian banks will change drastically during the next 2-3 years along with a decrease of the number of active banks.
He did not rule out the possibility of newcomers becoming significant players in the market, but cautioned that none of them has managed until now to show a clear and viable vision or even the intention to pursue dominance in the market in the mid-term.
The newcomers, in his view, could be either traditional banking institution not yet present in this market, or financial investors specialized in consolidation of companies and markets, or institutions active in other kind of financial services, or investors striving to reshape some services of traditional banking via innovative services made possible by the digital revolution.
Abroad, the Hungarian banking group is also present in Slovakia, Bulgaria, Romania, Croatia, Russia, Ukraine and Montenegro.