TEL AVIV, Dec. 20, 2007 (PRIME NEWSWIRE) -- Ukrinbank, founded in 1989, is one of Ukraine's oldest banks and its oldest private bank. At the end of the third quarter of 2007, the Bank's assets totaled $280 million, with $85 million in shareholders' equity. These figures position Ukrinbank in 43rd place in Ukraine out of about 150 banks operating there. Bank Hapoalim will acquire 76% of Ukrinbank for $136 million, reflecting a total value of $180 million for the Ukrainian bank.
Ukrinbank is focused on activity with small and medium-sized enterprises (SME) and with private customers, via a network of approximately 30 branches and more than 100 additional sales points located in 24 of 25 provinces in Ukraine. The bank's headquarters are in Kiev, the state capital. Ukrinbank has more than 80,000 customers, of which about 23,000 are business clients, and has a strong presence in the areas of credit cards and ATMs.
Bank Hapoalim Chairman Dani Dankner commented, "One of the most important objectives of Bank Hapoalim's long-term strategy is to increase the weight of international operations in our total banking activity, as part of the strengthening of Bank Hapoalim's position as a global bank with worldwide operations, including in emerging markets, and the creation of opportunities for our clients to enjoy the fruits of this process. I am pleased with our decision to add Ukraine to the circle of countries where we do business, through the acquisition of Ukrinbank. This acquisition is an important step in the implementation of our strategy, particularly in light of the fact that it will create opportunities for our clients, in Israel and in all of our international offices, to develop economic and commercial relationships in Ukraine - one of the largest and most important countries in Eastern Europe, which has enjoyed impressive growth in recent years and has immense business potential in many areas. Ukrinbank will join Bank Hapoalim's expanding activity in the emerging markets, along with Bank Pozitif in Turkey and DKB in Kazakhstan.
Bank Hapoalim CEO Zvi Ziv said, "The acquisition of control of Ukrinbank is an important step in Bank Hapoalim's entrance into the key ex-USSR markets. Following our thorough analysis, I am certain that Bank Hapoalim will be able to take advantage of the great potential in Ukraine, like other leading international banks. Ukraine aims to rapidly develop its banking sector and narrow the gaps with Western banking systems; I have no doubt that we can play a part in this process, while creating significant value for Bank Hapoalim. Through Ukrinbank, we plan to develop activities in a variety of areas of banking in Ukraine, using the knowledge and experience accumulated by the Bank and its executives and employees in the process of transforming Bank Hapoalim into a truly global bank."
Background - Ukraine and the Ukrainian Economy
Ukraine, which achieved independence in 1991, is the second-largest country in Europe (after Russia), with an area of 600,000 square kilometers and a population of 47 million.
In 2004, Ukraine underwent the "Orange Revolution" -- a democratic political process that led to the toppling of the autocratic regime and the ascent to power of pro-Western leaders with a positive approach towards Ukraine's joining the European Union and NATO. The heads of the new regime took brisk steps to liberalize the Ukrainian economy and open the market to competition. As a result, the country's economy stabilized and a period of rapid growth began.
Rapid economic growth: The Ukrainian economy grew at an impressive average annual rate of 7.4% in 2000-2006. The forecast growth rate for 2007 is 7.2%, and the outlook for the next three years also indicates that the Ukrainian economy should enjoy growth rates higher than 6% per year. Particularly notable is the rapid growth in investments and in private consumption, estimated at 14% and 12.1%, respectively, this year.
The Ukrainian economy relies on natural resources, a highly developed industrial sector, agriculture, a skilled workforce, and a strong educational system.
The high potential of the Ukrainian economy also stems from its future integration into the European Union: Per-capita GDP in terms of purchasing power is approximately $7,500, considerably lower than in EU countries and actually lower than the GDP in other Eastern European countries such as Poland, Hungary, and others.
Another positive factor in the Ukrainian economy: An exceptionally low ratio of public debt to GDP (11%). Against this background, the deficit of about 2 percent of GDP in the government budget does not arouse concerns among investors or rating agencies.
Progress is expected in the reduction of inflation as well -- from 14% this year to single-digit levels within the next few years.
International economic bodies including the World Bank and the International Monetary Fund see Ukraine as one of the most important, foremost Eastern European countries, and predict that in the coming years it will experience high growth rates and rapid development in banking and finance, including the areas of credit, mortgages, and more.
In recent years Ukraine has attracted growing interest from international economic entities that have recognized its inherent potential. The country has seen an inflow of foreign direct investments (FDI) on the scale of about $3 billion on average annually in the last four years; these investments are expected to continue and grow further in the coming years. The Ukrainian government is making great efforts to attract foreign investors, while conducting economic policy based on budgetary restraint, structural reforms, and improvement of the legal and regulatory systems, with the explicit ambition of acceptance into the World Trade Organization.
The Ukrainian banking system is also affected by these changes in regulation, and is persistently closing the gap with Western standards. Changes include maintaining capital and liquidity ratios, transparency, adjusting accounting to standard international practices, establishing risk-management systems, reducing sole-borrower exposure, deposit and investment insurance, and more. These regulatory improvements have drawn foreign banks to Ukraine; these banks' involvement in the Ukrainian banking system is currently estimated at 34%. The Ukrainian banking sector has one of the highest growth rates among the ex-USSR countries. The volume of banking loans increased by 69% year-on-year in 2006. Concurrently, the profitability of Ukrainian banks has greatly increased recently, and return on equity now stands at 12% on average, versus 10% in 2005 and 7% in 2003. Profitability is expected to rise further, as efficiency improves and Ukrainian banks become more deeply involved in highly profitable areas such as mortgages and additional services for retail customers.
About Bank Hapoalim
Bank Hapoalim is Israel's leading financial group and largest bank. In Israel, the Bank Hapoalim Group includes two commercial banking subsidiaries, as well as financial companies involved in investment banking, credit cards, trust services and portfolio management. The Group also has holdings in non-banking sectors.
Overseas, Bank Hapoalim operates through 44 branches, subsidiaries and representative offices, in North and Latin America, Europe, the Far East, Turkey and Australia. In these markets, the Bank is engaged in trade, corporate financing, private banking and retail banking.
Bank Hapoalim is the only Israeli Bank listed on both the Tel Aviv and London Stock Exchange. In addition, a Level-1 ADR is traded "over-the -counter" in New York.