Banks and Banking--Bank Acquisitions Ukraine

Emerging Markets Economic Briefings notes:

The news of another large Ukrainian bank about to be acquired by one of the leading European financial institutions seems to confirm the trend that foreign bankers are willing to bet on Ukraine, and to do so in spite of political instability ahead of the March parliamentary elections.

I was talking to an analyst the other day who is working with a couple of banks about the banking sector here. He said that there are acquisitions taking place but he thinks they typically overpay. A lot of that is not knowing the financial history here. For example, one of the problems he finds also in the banking sector here is that a lot of banks have what essentially non-arms length loans that is loans that have been made to related third parties is how he put it. This has happened because most bansk started as a repository for a large company's cash. In other words, most banks were wholly owned by large companies here and there was no separate identity. A foreign bank looking for an acquisition here needs to be careful of that.

This said, there is a lot of room to grow here and there is a need for competition. A typical mortgage here is around 18% and there is a kind of inflation formula factored in. And a lot of services that banks offer in the West do not exist here. Checking accounts are unheard of, for example. If a person needs to pay on a mortgage, for instance, he either has to have an account in that bank or take cash to that bank to pay for it. Nothing else is available for use.