Accessibility links

Breaking News

Ukraine: Austrian Bank Sees Prospects For Profits

Kyiv, 24 February 1998 (RFE/RL) -- Ukraine's political situation is uneasy, and currently influenced by whether leftists will prevail in next month's parliamentary elections. Add to that an economy that continues to contract, and a banking system that offers few incentives to investors. Yet Creditanstalt A.G. (CA), a subsidiary of Bank of Austria, and one of Central Europe's leading investors, says it will open the doors of Joint Stock Commercial Bank Creditanstalt Ukraine (JSCBCU) by Summer, at the latest.

What is it that the Austrians see in Ukraine that colleagues and competitors in London and Berlin are missing?

"That's a good question," concedes Creditanstalt deputy chairman of the Managing Board, Alarich Fenyves. But he has a ready answer.

"We've got a lot of experience in these markets," he says. "It's a matter of properly controlling risk and managing transactions carefully. We've done this sort of thing in other places, and we believe we can be successful in Ukraine as well."

But the opportunity to add luster to its already considerable reputation in former-Communist countries had little to do with Creditanstalt's decision. In the final analysis, what matters most is profit -- and local conditions can yield plenty, JSCBCU management believes. "The Ukrainian market is very dynamic," says JSCBCU Chairman of the Management Board Olexander Savchenko. "It can go up 100 percent one day, and drop 100 percent the next. If a bank knows what it's doing, good profits can be made."

Significantly, Savchenko's Austrian partners agree with that market evaluation, which by almost any standard, is a vote of confidence for Ukraine, as a possible target of Western investment.

With total assets of $125 billion, and a strong presence in places like Moscow and Budapest, Bank of Austria is one of the prime conduits through which corporate money has poured into East Europe. Now, it would seem, it is Ukraine's turn.

"Ukraine is a huge market and we cannot afford to ignore it," Fenyves says. "We have gone into the rest of Eastern Europe at a very early stage. This is our approach in Ukraine as well."

The beginning will be modest. Initial capital for the joint venture between Creditanstalt and Ukrainian Aval Bank will total about $10 million, with the Austrians contributing most of that sum. The International Finance Corporation, the private investment arm of the World Bank, plans to buy a 20 percent stake in the new bank, Fenyves says.

The bank's primary business will be servicing big corporate customers, mostly those who are involved in some variety of exports from Ukraine. "Our goal is to link the Ukrainian market with Central Europe," Savchenko says. "The trade is already going on. We will be providing letter-of-credit (LC) services from a solid European bank to customers abroad."

LCs -- international credit/debit agreements, which allow a buyer in one country to purchase something in another country with a minimum of risk -- come in many forms and from many banks.

In a banking market that, so far, most Germans, Japanese, and Americans have avoided, a solid Austrian name on a LC could constitute a competitive advantage. "If customers see no difference between the service range and quality he gets in say, Vienna and in Kyiv, they will be far more willing to trade in Ukrainian goods," says JSCBCU spokeswoman Bohdana Tkachuk.