TIRANA, Jan. 21 – Albania’s competition watchdog says it has approved the sale of Tirana Bank, a unit of Piraeus Bank, to a joint venture controlled by Albania’s largest company with operations in the country’s key sectors, but set a series of conditions and restrictions that would prevent new investors from abusing possible future dominant position due to the huge impact of their business operations on the country’s economy.
A unit of Greece’s largest lender with a local market share of around 5 percent, Tirana Bank was sold to Albanian-owned Balfin Group and Macedonia’s Komercijalna Banka for €57.3 million last August in a transaction where Balfin Group, already operating in a series of sectors, but not in the banking system, is reported to have a majority stake.
The competition authority says that due to its expected stronger market power, the bank’s new owners have the legal obligation not to abuse their position by applying discriminatory criteria for market operators and guarantee the stability of bank staff following the takeover.
The competition watchdog also says the bank must not carry out banking or financial operations with and for the benefit of people related to it although current banking legislation envisages that exposure to people related to the bank must not exceed 20 percent of the bank’s capital adequacy ratio, which in Albania is at a minimum of 12 percent of risk-weighted exposures.
The watchdog also recommends the country’s central bank that all current and future Balfin-controlled companied should be monitored and treated as operations connected to the banking system despite the scope of their activity.
Competition authorities fear the conglomerate merger between two companies with unrelated business activities, but cooperating in neighboring Macedonia where Albanian-owned Balfin runs construction and retail trade businesses, while not having any immediate market effect, could generate changes fuelled by external factors in the longer-run.
“Balfin Group, the main shareholder of Tirana Bank, controls a big number of companies both in Albania and abroad and the activity of Tirana Bank is expected to be influenced by the economic activity of Balfin-controlled companies and the economic and financial performance of those companies is expected to serve as a guarantee for the stability of Tirana Bank and the whole banking system in general,” says the competition authority.
“The acquisition could orient the circulation of all liquidity and banking services by Balfin-owned companies to Tirana Bank which could significantly increase its future market share due to their good performance and return rates,” it adds, suggesting the monitoring of the behaviour of Tirana bank for a 1-year period.
Central bank not worried
While Albania’s central bank has not had its final say yet, the takeover of a medium-sized commercial bank with a market share of around 5 percent, does not seem to worry it.
Responding to concerns expressed by the competition authority, Albania’s central bank says the change in ownership at Tirana Bank will not have any impact on its market position or negatively affect the implementation of the Bank of Albania’s monetary policy or currency exchange operations.
Despite a series of mergers and acquisitions and new market entrants in the past couple of years, Albania’s central bank describes the country’s banking system as well-capitalized, liquid and profitable. However, due to poor demand and tight lending standards as a result of declining but still high non-performing loans, credit has been growing at moderate rates of around 4 percent when adjusted for effects such as euro’s free fall and the write-off of non-performing loans statistically keeping lending at negative growth rates.
A new merger and acquisition between two small banks has reduced the number of commercial banks operating in Albania to 13, down from a decade of 16 until 2018 when two foreign-owned banks sold their Albania units to local rivals.
Earlier this month, Albania’s competition authority okayed the sale of the International Commercial Bank, the Albania unit of Switzerland-based ICB Financial Group Holdings with units also in Tanzania and Bangladesh, to Albanian-owned Union Bank, where London-based European Bank for Reconstruction and Development also holds a minority stake.
Several other loss-making small banks operating in the country are also reportedly on sale as credit struggles to recover amid high deposit-funded liquidity but tight lending standards as non-performing loans stand at around 13 percent, down from a record high of 25 percent in mid-2014.
Experts say bank consolidation, the process by which one banking company takes over or merges with another, is expected to continue and further 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.
The International Monetary Fund has recommended 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.”
Albanian-Macedonian takeover
Operational in Albania for about two decades as a unit of the Piraeus Bank, Tirana Bank had seen its market share almost halve in the past decade. The country’s seventh largest bank held assets worth about 78 billion lek (€627 mln) at the end of the third quarter of 2018, with a market share of 5.3 percent, according to the Albanian Association of Banks. The loss-making bank had 39 outlets and 429 employees at the end of September 2018.
Tirana Bank is the third Greek unit to have changed hands in the aftermath of the 2008-2009 global financial crisis and Greece’s severe recession hitting the banking sector there.
Alpha Bank Albania, a unit of Greece’s fourth largest lender, is now the sole remaining Greek unit operating in Albania. Its late 2018 assets were at 5.3 percent, making it the sixth largest bank in the country.
Balfin Group is Albania’s largest company owned by Albanian investor Samir Mane who is now diversifying his investment portfolio also in the banking sector after successful operations in the mining, construction, retail trade and tourism sectors in Albania and Kosovo and Macedonia.
Komercijalna Banka is the largest Macedonia’s largest lender, where London-based also held a minority stake for more than two decades until late 2017.
Balfin-owned companies have an estimated annual turnover of more than €250 million in Albania and around €600 million in total considering operation abroad, mainly in Kosovo and Macedonia. Balfin-owned companies employ more than 3,000 people in Albania, mainly in retail trade and mining sectors, making it Albania’s largest private sector employer.
