Romania's Banca Transilvania boosts market lead with purchase of OTP Bank ops

Banca Transilvania SA will further strengthen its market-leading position in Romania with the purchase of the local business of Hungarian OTP Bank Nyrt.

The €345.7 million deal, which was announced Feb. 9 and will complete in the coming months, will increase Banca Transilvania's total assets by close to 13%, according to S&P Global Market Intelligence calculations.

It is one of several recent deals in Romania's banking sector as EU-based peers seek to gain scale in the market.

Italy-based UniCredit SpA and Greece's Alpha Services and Holdings SA merged their local units in Romania, creating the country's third-largest bank by assets and leapfrogging BRD - Groupe Société Générale SA, the local unit of French banking group Société Générale SA. Italian lender Intesa Sanpaolo SpA will double its assets in Romania following the recently announced acquisition of First Bank SA, and its unit could become the country's tenth-biggest bank.

This is Banca Transilvania's second acquisition in recent months. Looking to expand outside of its home country, the Romanian lender previously completed the purchase of Erste Group Bank AG's Moldovan unit via its local subsidiary B.C. Victoriabank SA.

It also strengthened its position in the Romanian leasing segment in 2022 with the purchase of Tiriac Leasing SA, while in 2021 it bought Idea Bank SA, the local banking unit of Poland-based Getin Holding SA.

The lender is open to further M&A, Chairman Horia Ciorcilă said when the OTP deal was announced. Pension, asset management and leasing were areas of interest for potential M&A cited by the bank's executives during the third-quarter earnings call in November.

The deal-making push has helped Banca Transilvania to more than triple its assets from 48 billion lei in 2015 to 158 billion lei as of the end of September 2023, Market Intelligence data shows. The bank's return on equity has grown in recent years, though it remains below 2015 levels.

Banca Transilvania's stock has also risen, outperforming its local and regional peers, as well as the wider Euro Stoxx Banks index.

Lacking scale

For OTP Bank, the transaction marks its withdrawal from the Romanian market after 20 years.

"We have achieved substantial organic growth in recent years, but it has become clear that we cannot achieve our strategic growth target without acquisitions. And there is little prospect of potential acquisitions in the foreseeable future," OTP CEO Sándor Csányi said when the transaction was announced.

While the transaction will have a negative after-tax impact of 59.5 billion forints on OTP's consolidated financial result for the fourth quarter of 2023, it will increase the bank's consolidated capital adequacy ratio by 52 basis points upon closing.

– Access M&A data using the screener tool. – View aggregate data for Romania's banking sector. – View a branch map for Banca Transilvania.

OTP, which has a presence in markets across central and Southeast Europe, reported an attributable net profit of 280.4 billion forints for the third quarter of 2023, while its net profit for the nine months ended Sept. 30, 2023, jumped to 856.6 billion forints from the year-ago 231.5 billion forints. Its total capital adequacy ratio was above 18% after the third quarter.

The bank guided in November for a full-year adjusted return on equity ratio of above 25% amid higher margins and lower risk costs.

As of Feb. 14, US$1 was equivalent to 362.85 Hungarian forints and 4.64 Romanian lei.