Russian Oligarchs Set to Acquire New Ukrainian Bank, Pushing Total Sector Ownership to 20%

On January 11, 2016, ABH Holdings (ABHH), a Luxembourg-based subsidiary of Alfa Group (a private Russian investment consortium) announced a deal to acquire Ukrainian bank Ukrsotsbank from Italy‘s UniCredit via a share swap.  The acquisition would bring Russian control of Ukraine’s banking sector to an estimated 19% (or $48 billion of the country’s solvent banking assets).  Ukrsotsbank is the 7th largest bank in the country, holding $1.7 billion in assets, and, if acquired, ABHH would become the fourth largest bank in the country.  When the proposed acquisition was first announced in August 2015, ABHH’s chief Petr Aven was quoted as saying, “This proposed deal is simultaneously tactical and strategic.  Thanks to it, ABHH…will become an unrivaled player on the Ukrainian market.”

The acquisition has reportedly yet to be approved by the National Bank of Ukraine and the country‘s anti-trust agency.  Under the terms of the current agreement ABHH has agreed to provide UniCredit with 9.9% of new shares in the company, a seat on the board and, in return, will charge the bank $217 million in the fourth quarter.  One of the striking features of this acquisition is the dilapidated position of the bank involved, raising questions as to whether commercial considerations were driving this decision.

Five of the top 13 banks in the country are Russian-controlled.

  • -Prominvest
  • -Sberbank Russia
  • -VS Bank
  • -VTB
  • -Bank and Forward

This percentage control of the country’s banking sector represents a troubling degree of potential leverage for Moscow within the country.  If it is permitted to rise further, it would demonstrate a lack of security-minded oversight over the strategic threat that such leverage implies.