Sberbank makes a good bargain in Austria

Russia’s leading bank has managed to significantly lower the price it pays for the international operations group of Austria’s biggest banks.

Sberbank bosses agreed with Volksbank AG (ÖVAG) managers to transfer 505 million Euros for all federal branches of Volksbank International (VBI) except its ailing Romanian department. Contracts sealing the takeover were signed in Vienna yesterday (Weds).

ÖVAG chiefs hoped to rake in between 700 million and one billion Euros for the eight VBI sections before Sberbank offered only 585 million Euros last year. ÖVAG bosses decided to continue negotiating with the Moscow-based finance institute as no other bank declared interest in a takeover.

ÖVAG CEO Gerald Wenzel defended the decision to give the deal the go-ahead. He told radio station Ö1 today that the sale was a positive step for his bank in uncertain times. Wenzel justified the takeover price which many experts consider as too low. He stressed that the sale was overshadowed by the economic thunderstorm which currently raged across Europe.

Wenzel claimed that the decision to get rid of VBI would fit in perfectly with ÖVAG’s new strategy of focusing on its core operations such as private banking across Austria. Asked what would happen to VBI’s Romanian department, the ÖVAG chief said the restructuring procedure would continue to make the financial firm fit for a sale in three to five years’ time.

Sberbank, which has more than 250,000 employees, announced that Siegfried Wolf would become the chief of VBI supervisory board. The Austrian businessman worked for Austrian-Canadian car parks manufacturer Magna International for 15 years before becoming head of Russian Machines, the automotive division of Oleg Deripaska’s enterprise Basic Element.

ÖVAG is expected to strengthen ties with its regional Austrian departments to become a solid and financially healthy bank again. ÖVAG has received over 1.1 billion Euros from the Republic of Austria since 2008 to help it fight the crisis. The bank suffered a loss of around 900 million Euros in 2011. Around 250 ÖVAG employees will be laid off in the coming months, according to a recent statement by the bank’s executive board.

Speaking to Ö1 today, Wenzel underlined that other Austrian finance institutes received participation capital as well. The banker said ÖVAG would now concentrate on getting back in the black before thinking about repaying the lion’s share of the financial support it had received from the state in past years.

Wenzel told the radio station’s morning news programme that ÖVAG might make a profit as early as this year. Already in December, the struggling bank’s chairman said it considered stopping providing credits to companies which develop, buy and sell properties. He refused to strictly rule out that ÖVAG could be forced to ask the Republic of Austria for another capital injection in the foreseeable future.

ÖVAG failed the European Banking Authority’s (EBA) most recent stress check. The aim of the test, which was carried out last year, was to determine whether Europe’s biggest banks could weather a worsening of the crisis. EBA decided that the continent’s 70 biggest finance institutes must ensure a capital ratio of nine per cent. The banks were given until June to fulfil this criterion. Sberbank’s acquisition means that ÖVAG does not have to match EBA’s standards due to the strong decrease of the bank’s size and radius of operation.