Poland’s Getin Holding and Ukraine’s TAS Group have signed an agreement to buy Idea Bank Ukraine. The purchase will cost the new owner $34 million and will become the first merger and acquisition (M&A) deal in the banking sector after Russia launched its full-scale invasion of Ukraine in February 2022.

Ukraine’s central bank, the National Bank of Ukraine (NBU), forced Idea Bank’s former owner, Getin Holding, to sell the bank by the end of October because its owner, Leszek Czarnecki, was the subject of a criminal investigation in Poland.

The NBU recognized the impeccable business reputation of the Polish holding itself and its owner Charnecki on March 27, 2023, Interfax-Ukraine reported. Getin Holding’s advisors included Ukrainian investment company FinPoint and Ukrainian law firm Sayenko Kharenko.

The buyer of 100% of the shares is Alkemi Limited (Cyprus), part of the TAS group, owned by Serhiy Tigipko.

The deal is signed, but that’s not the end of the story. It must also be approved by the NBU and the Antimonopoly Committee of Ukraine. The Agreement is governed by English law and the requirements of the Warsaw Stock Exchange, states the TAS Group press release. said.

“If regulatory approval is obtained, the transaction could be finalized in the first quarter of 2025,” the TAS Group press service told the Kyiv Post.

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Despite the 3.6% real GDP growth forecast by the IMF for Russia in 2024, the long-term economic outlook is limited by strong demand that local production and imports are unable to meet.

However, Idea Bank was a moneymaker years before this year’s deal was struck.

A solid economic model

Idea Bank was one of the first commercial banks in Ukraine and obtained its banking license in 1996, according to recordings of the NBU. In the 2000s, the Polish Getin Holding bought it and integrated it into the group.

For nine months in 2024, Idea Bank ranked 26th in terms of assets ($11.7 billion, $282 million) according to NBU statistics.

Idea Bank’s net profit ranks 19th on the list, comprising only Hr. 473,000 ($11,400). The bank is known for its consumer loans (small loans that individuals can borrow before receiving their next paycheck) and is not the only one in this niche. Other players earn much more, for example A-bank and Monobank. Bank A earned more than HR. 1 billion ($24.1 million) in net profits for the same nine months this year, while Universal Bank, which runs Ukraine’s popular digital bank for Gen Z Monobank, earned almost 4 billion hrs ($96.5 million).

Despite Idea Bank’s modest results, Ukrainian investors were seeking the bank even before the COVID-19 pandemic. A Dragon Capital Group company, owned by Czech entrepreneur Tomas Fiala, nearly bought the bank in 2019 for $58 million, but canceled the deal due when the pandemic took hold.

PUMB Bank, part of SKM Holding owned by Ukraine’s richest man Rinat Akhmetov, signed a deal to buy the bank at the end of 2021 for around $50 billion, but the deal did not was finalized due to Russia’s invasion of Ukraine. Forbes Ukraine reported.

What makes the Idea Bank so special?

A banking industry source close to the 2024 deal, who asked to remain anonymous, told the Kyiv Post that the bank works with riskier clients and does so with confidence, although specific details cannot be disclosed due to their sensitivity.

“To just scratch the surface, the bank is successful in its niche and competes successfully in the riskier segment of retail lending,” the source said.

The bank’s share of loans amounts to approximately 70% of its portfolio – the highest level compared to other operators in the Ukrainian banking sector, the average being 25%. The closest competitor is Bank Lviv, whose portfolio includes 64% loans.

“It is the most bankable bank in Ukraine,” wrote financial analyst Yevhen Dubogryz in his article on Facebookexplaining the phenomenon.

Non-performing loans reach 44% compared to 60% in 2022.

This “seems like a lot” according to Dubogryz. But the key indicator of profitability, the operating ratio, reached 34%, one of the best results in the sector.

“The bank can generate around $10-12 million in net liquidity per year and it can pay it back in 3-3.5 years,” the financial analyst added.

So let’s look at the buyer.

Who is the TAS Group and who is Serhiy Tigipko?

The deal with Idea Bank was a fire sale. Poland opened an investigation against Getin Holding owner Leszek Czarnecki, Poland’s richest man, in 2008. He faced charges from law enforcement for alleged fraud involving 130 million zlotys (£32.2 million) of Idea Bank Poland customers’ money. Polish media reported.

Czarnecki lost Idea Bank and Poland’s tenth largest bank, Getin Noble Bank (GNB), as they were both placed in the state bank guarantee fund due to a lack of capital.

Czarnecki probably left Poland in the trunk of his car and is now hiding abroad, Polish media wrote. This perhaps explains why the NBU recognized as flawed the business reputation of the Polish holding itself and its main owner Czarnecki, Interfax reported.

In May, the regulator set a deadline to sell quickly until the end of October 2024. This makes the transaction complicated.

Three finalists offered higher prices than the other five, the source said. The sum of $34 million turned out to be a decent price for wartime Ukraine.

“The sale price of the bank is equal to approximately 1x the capital at the end of 2023 and approximately 0.75-0.8 of the bank’s capital on the expected closing date of the transaction. Our competitors that are publicly traded are typically valued between 0.3 capital (Raiffeisenbank International) and 1+ capital (OTP),” wrote FinPoint founder Serhii Budkin.

Initially, it was the Ukrainian group TAS which won. The TAS Group is owned by Ukrainian Serhiy Tigipko, a successful entrepreneur and politician.

Its owner, Serhii Tigipko, is the founder of Ukraine’s largest bank, Privatbank, which he later sold to Dnipro oligarch Ihor Kolomoisky. He founded the TAS Group which includes companies in the financial sector: B2B bank TAskombank, digital retail bank Gen Z Monobank, leading auto insurance company TAS.

The TAS Group operates a freight wagon production plant, Dniprovagonmash. It also became a sandbox for digital banks, from which the neobanks Sportbank and Izibank were founded. Izibank still operates, but Tigipko stopped cooperating with Sportbank and was closed in 2024.

Tigipko entered politics as a lawmaker during the era of ex-Ukrainian President Viktor Yanukovych, who fled the country after the Maidan Revolution in 2014. In 2024, Tihipko now focuses on business and its strategy is “to invest in Ukraine and sell abroad”. »

The company’s portfolio includes a farm with 80,000 hectares of land and 11 factories in various industries. These include the manufacture of wagons for European railways in collaboration with Austrian heavy industry giant Voestalpine.

Idea Bank is a potential tool for making money on personal loans. The Polish investigation may even have helped secure such a long-awaited deal for the Ukrainian market.

Idea Bank Ukraine has been profitable without any help from the parent company, which is the bank’s strength.

“Ukrainian Idea Bank was not affected by the problems surrounding its shareholder,” ICU financial analyst Mykhailo Demkiv told the Kyiv Post.

“The bank has a transparent business model and is profitable,” he added.