TIRANA, June 26 – The Albania unit of Italy’s Intesa Sanpaolo and its newly acquired loss-making Veneto Banka Albania are set to merge by the end of this year, in a merger that marks the beginning of a consolidation process in Albania’s banking system.
Intesa Sanpaolo Bank Albania says its shareholders have decided to proceed with the merger and expects the process to conclude by the end of the third quarter of this year as it holds negotiations with more than a hundred Veneto Banka employees in the country who risk being made redundant.
The fourth largest bank in Albania say it has addressed Albanian state authorities for assistance after no deal has been reached yet with the Veneto Banka Albania Council of Employees, representing workers interests.
“Intesa Sanpaolo SpA reconfirms the restructuring plan is due only to economic, technological and structural reasons as disclosed in the already published documents. The merger process is supposed to be completed by September 2018,” the bank said in a statement.
One of the smallest banks in terms of assets in Albania, Veneto Banka had five outlets and 123 employees at the end of 2017, according to the Albanian Association of Banks. Its assets represented only about 2 percent of the total in the country’s current 16 commercial banks at the end of 2017.
Meanwhile, Intesa Sanpaolo Bank Albania is one of the big four banks operating in Albania with total assets of 159 billion lek (€1.25 billion) at the end of 2017. Its assets represent about 11 percent of total bank assets in Albania’s banking system and include almost equally diversified loans, investment in securities and placement with banks.
The merger process comes one year after Intesa Sanpaolo, Italy’s largest retail bank, acquired the bankrupt Veneto Banca in Italy and its subsidiaries in several European countries including Albania. The merger and the apparent rebranding is expected to cut the number of commercial banks operating in Albania to 15 and increase Intesa Sanpaolo’s share in assets to about 12.8 percent, making it the third largest bank in the country with a slight advantage over majority-Albanian owned Credins Bank.
Intesa Sanpaolo has been operating in Albania since 2007 when it acquired the American Bank of Albania, the first private bank in Albania established in 1998 by the Albanian-American Enterprise Fund.
Meanwhile, Veneto Banka has been operating in Albania since 2009 after purchasing and rebranding Banca Italiana di Svillupo (BIS Bank), and mainly serves small and medium-sized businesses, especially Italian-run companies who dominate the number of foreign-owned companies in the country.
A possible merger of the American Bank of Investments, ABI, and its newly acquired Albanian subsidiary of Greek-owned National Bank of Greece, NBG, could cut the number of commercial banks operating in Albania to 14.
An American-Albanian bank that has been operating in Albania since 2016, ABI acquired NBG Albania in early 2018 following the loss of significant market share in Albania in the past decade and amid financial trouble its Greece-based parent bank has been facing in the aftermath of the 2008 crisis and the worst-ever recession in neighboring Greece.
Bank consolidation
Experts say bank consolidation, the process by which one banking company takes over or merges with another, is expected to continue and further the reduce the number of banks in the country, but at the same time not affect competition in a market where the four largest banks already hold more than two-thirds of total assets, at 68 percent at the end of 2017.
Experts believe the consolidation process will lead to tougher competition and improved access to banking services at a time when credit still remains sluggish, negatively affected by both tight lending standards applied by banks and poor demand by businesses and households.
However, the restructuring and growing online banking is expected to have a negative impact on bank employees.
The 16 commercial banks operating in the country cut dozens of branches and jobs nationwide last year as lending remained sluggish and e-banking gradually expanded despite banks registering record high profits.
The country’s banking system is considered well-capitalized, liquid and profitable.
Yet, in its latest statement, the International Monetary Fund recommends that “ensuring that new market entrants have solid banking experience and meet fit and proper criteria to operate in the Albanian banking market will be critical.”
The Albanian banking system is overwhelmingly foreign owned but the market share of EU-owned banks has dropped by 15 percent to about 52 percent in the past four years as domestic owned banks expand and EU-owned banks continue deleveraging.
Turkish-owned BKT, Austria’s Raiffeisen and Albanian-owned Credins bank were the top three banks in terms of assets that include loans, investment in securities and interbank placement at the end of 2017.
Record high profits
A sharp cut in provisioning needs as non-performing loans continue their downward trend supported by the mandatory write-offs of loans that have spent three years in the ‘loss’ category led to historic high profits for commercial banks operating in Albania in 2017.
Bank of Albania data shows the 16 overwhelmingly foreign-owned banks operating in Albania posted record profits of about 22 billion lek (€173 mln) in 2017, more than double compared to 2016 and breaking a previous record of about 15.7 billion lek (€124 mln) in 2015.
The record high profits come at a time when credit struggled to remain at positive growth rates, registering a mere 0.5 growth rate but moderate rates of about 3 percent when adjusted for the exchange rate effect and the NPL write-offs.
Non-performing loans, a key barrier that has been keeping lending standards tight, dropped by an annual 5 percent to 13.23 percent at the end of 2017 and were about 12 percent lower compared to the peak 25 percent level in mid-2014.
