German Bank Expansion in South East Europe

In 1998 the HypoVereinsbank (HVB) became, through the biggest ever merger in German banking history, Germany's second biggest bank. In the year 2000 by taking over Bank Austria (by far the leading Banking group in Austria) HVB became the third biggest Banking group in Europe. The Bank Austria kept its name and is now responsible within the Group for Austria and the whole of East and South East Europe where it has the biggest bank network in the region with 950 branches in 15 countries and thereby surpasses the Italian Uni Credito, New York's Citibank and Societe Generale.

Downgrading of the HVB Subsidiaries

After the take-over of the Bank Austria the German bank's ambitious expansion plans were held up. One reason was serious conflict with the management of the Austrian bank. The cross border take-over had only been allowed because the HVB had guaranteed The Austrian Bank wide ranging autonomy. But shortly afterwards the boards of the HVB subsidiaries saw that they had de facto had their power removed since the management responsibility was transferred to the board of the parent company. Secondly HVB needed to raise new capital in order to finance the billions of Euros for further take-overs and to prevent their own inadequate capital ratios leading to a reduction in their credit ratings.

Massive Growth Potential

Now HVB is floating 25% of the shares in its Bank Austria subsidiary and will raise one billion Euro in the largest (continental) European flotation of the year. Part of the process is the transfer of HVB shares in the third largest bank in Poland (Przemyslowo-Handlowy PBK SA) to Bank Austria which will then own 71% of the Polish bank. The new capital is to be used for further purchases and participations in eastern Europe. With a high priority 5 year plan the Bank of Austria will further expand its leading position in these markets. The East European Bank market will have massive growth potential declared the HVB subsidiary which expects a growth rate of 10% per annum.

HVB announced ,,We will be expanding in this growth region with added muscle". Further take-overs have already been announced: The Bank Austria intends to buy up to 81% of the Central Profit Bank in Sarajevo, the fourth largest Bosnian bank. It is also planned to buy the whole of CAC Leasing in the Czech Republic and in Slovakia. Also being considered is the Posta Banka in Hungary which is due to be privatised in September.

Sources:
Hypo-Vereinsbank rüstet sich für Zukäufe; Die Welt 23.05.2001
HVB: Streit mit Bank Austria verschärft; Die Welt 02.03.2003
Bank Austria soll Milliarden bringen; Süddeutsche Zeitung 24.06.2003
Aktien der Bank Austria kommen zu 27 bis 31 Euro auf den Markt; Frankfurter Allgemeine Zeitung 24.06.2003