Bloomberg News

UniCredit Says It’s ‘Nuts’ to Suggest It’s Leaving East Europe

December 16, 2011

Dec. 15 (Bloomberg) -- UniCredit SpA, eastern Europe’s biggest bank, isn’t pulling out of the region and anybody suggesting it does is “nuts,” the executive managing the lender’s business in the former communist part of Europe said.

The lender still expects the region stretching from Croatia to Kazakhstan to grow faster than western Europe, said Gianni Franco Papa, deputy chief of UniCredit’s Bank Austria told reporters in Vienna late yesterday in remarks embargoed until the end of the group’s shareholder meeting in Rome today.

While UniCredit has put branch expansion on hold in Hungary and Romania, this doesn’t mean it plans to pull out of them. It continues to open new branches in Turkey, Russia and the Czech Republic is plans to add more than 1,100 staff across the region in the next five years, Papa said.

“If the message received is ‘UniCredit is pulling out of central and eastern Europe,’ I believe that the one receiving that message is nuts,” Papa said, adding that it’s “common sense” to cut spending if economic growth is slowing down.

With three quarters of eastern Europe’s banking assets outside Russia owned by western lenders led by UniCredit, Erste Group Bank AG and Raiffeisen Bank International AG, policy makers in the region are monitoring closely any indication they may sever their ties. Romanian President Traian Basescu urged Austrian banks Nov. 24 to keep lending in his country. Hungary bashed Erste’s Dec. 9 for announcing job cuts there.

Revised Plan

Papa had said in January that UniCredit would open 900 new branches over the next five years in the countries where it hoped to grow most. The plan included 300 new branches each in Turkey and Romania, as well as 120 in Hungary. Eleven months on, the plan was revised due as the economic outlook worsened.

“Given the current economic environment to open 300 branches would be suicidal,” Papa said about Romania, which didn’t return to the pace of economic growth he expected. “We have put on hold the openings and we are going to revisit the situation in a couple of years,” he said. “Romania is one of the core countries” for UniCredit, he said.

In Hungary, “with what the government is doing, it wouldn’t be wise” to stick to the old plan, Papa said. He commented before banks and the government announced today that they will share the costs for losses on foreign-currency loans. The branch openings in Turkey and Russia will continue as planned, he added, totaling as much as 400 until 2015.

No Sales, No Acquisitions

UniCredit’s plan for the next five years doesn’t include buying new or selling any of its existing businesses in the region, Papa said, adding that outside of Poland, no such deals are happening in the market either.

“If you want to buy, the market is not allowing you to pay any goodwill,” he said. “And I’m not sure that those who want to sell are ready to give it away.”

UniCredit is frequently receiving offers from other banks, Papa said. “It’s clear that the liquidity and the capital needs, the reduction of risk-weighted assets, all these sort of things” let banks consider asset sales, he said. “I’m receiving offers,” he said. “We say ‘no’ to all of them.”

--Editor: Zoe Schneeweiss

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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