ZAGREB (Reuters) - Austria’s Raiffeisenbank (RBA) is looking to make acquisitions in Croatia as organic growth alone will not be sufficient to boost its market share in the country, the CEO of the lender’s Croatian unit said on Wednesday.
RBA is the fifth biggest lender in Croatia, controlling slightly below eight percent of a market dominated by Italian-, Austrian-, and Hungarian-owned banks, according to central bank data.
“Our basic approach is organic growth through a high quality of service.. However, organic growth will not be enough to increase market share in a market with limited growth potential,” Michael Georg Mueller told Reuters in an interview.
Croatia currently has around 20, mostly smaller banks, with the five biggest players controlling 80 percent of the market.
UniCredit’s Zagrebacka Banka and Intesa Sanpaolo’s Privredna Banka Zagreb are the country’s two main lenders, followed by Austria’s Erste and Hungary’s OTP.
“RBA is seeking possible acquisitions to boost potential for reaching a targeted level of return on capital,” Mueller said without elaborating further.
OTP is also looking at two potential targets in Croatia, including a unit of Raiffeisen, sources and local media reports said last month, having already acquired much of the south east European network of France’s Societe Generale.
A Raiffeisen spokesman at the time said the lender had no intention to sell its Croatian business.
Croatia plans to formalize its bid to join the European Exchange Mechanism (ERM-2) by mid-July, a first step to adopting the euro, which the government wants to do by 2024.
Mueller said Croatia’s economy would benefit from using the single currency, with the advantages outweighing the costs.
“The biggest advantage is the removal of the exchange rate risk,” he said. “In addition, positive effects can be expected from lower interest rates and an increase in investments and international trade.”
Around 80 percent of deposits and 60 percent of loans in Croatia are already denominated in euros, but some opposition leaders and analysts argue that the country should follow Poland, Hungary and the Czech Republic and keep its own currency, the kuna.
In a recent poll conducted by the central bank, 52 percent of people were in favor of adopting the euro, with the 40 percent against mostly citing a fear of higher prices.
Mueller said that as prices in Croatia are already relatively high compared with the average in the euro zone, those fears were unfounded.
“There is no real reason to fear euro zone entry as it shouldn’t bring a significant rise in prices,” he said.
He added that Croatia could still do more to make its economy more resilient, which in turn would make the country appear less risky to lenders and thus lower its borrowing costs.
“A stronger institutional and legal environment would improve the perception of risk in Croatia, while the removal of the barriers to running business, together with the euro adoption, would draw more investment into the country,” Mueller said.
Reporting by Igor Ilic; Editing by Kirsten Donovan