Subject category:
Strategy and General Management
Published by:
IBS Research Center
Length: 10 pages
Data source: Published sources
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Abstract
On 3 July 2006, the Hungarian OTP Bank entered the Russian market through the acquisition of 96.4% stake of the Moscow-based Investsberbank Group, one of the top 50 banks in the Russian market covering almost 80% of the Russian territory. As per the terms of the agreement, the sixth-largest CEE (Central and Eastern Europe) banking group would transfer to its sellers 90% of the US$477.5 million purchase price while 10% of the amount would be deposited for one year on an escrow account. Russia, with a 143 million population, had a large number of unbanked clients and was seen as a key market for the consumer banking side of the business. The acquisition of Investsberbank Group manifested the Hungarian bank's ulterior motive to dynamically expand its horizons throughout Russia and capture the burgeoning retail market of the country. With 285.3 billion euros and a GDP growth rate of 6.4% at the end of 2005, Russia was OTP Bank's seventh market abroad besides being one of the promising markets in the CEE region. It remained to be seen whether the CEE-focused OTP Group would be able to do justice to its ambitious inorganic expansion strategy in Russia, a country where very few people were oblivious about the whereabouts of the Hungarian banking giant. At the same time, it also remained a moot question whether the acquisition of a small Russian bank would provide the impetus to capsize a sizable market share of the Russian banking sector.
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Abstract
On 3 July 2006, the Hungarian OTP Bank entered the Russian market through the acquisition of 96.4% stake of the Moscow-based Investsberbank Group, one of the top 50 banks in the Russian market covering almost 80% of the Russian territory. As per the terms of the agreement, the sixth-largest CEE (Central and Eastern Europe) banking group would transfer to its sellers 90% of the US$477.5 million purchase price while 10% of the amount would be deposited for one year on an escrow account. Russia, with a 143 million population, had a large number of unbanked clients and was seen as a key market for the consumer banking side of the business. The acquisition of Investsberbank Group manifested the Hungarian bank's ulterior motive to dynamically expand its horizons throughout Russia and capture the burgeoning retail market of the country. With 285.3 billion euros and a GDP growth rate of 6.4% at the end of 2005, Russia was OTP Bank's seventh market abroad besides being one of the promising markets in the CEE region. It remained to be seen whether the CEE-focused OTP Group would be able to do justice to its ambitious inorganic expansion strategy in Russia, a country where very few people were oblivious about the whereabouts of the Hungarian banking giant. At the same time, it also remained a moot question whether the acquisition of a small Russian bank would provide the impetus to capsize a sizable market share of the Russian banking sector.