In the Czech Republic, the country's largest private investor, the PPF Group, has succeeded in forming a new major bank in its third attempt.

On Monday, the shareholders of Moneta Money Bank approved 78 percent of the de facto takeover by PPF, which already owns 30 percent of the former GE Money Bank.

Through the merger of various PPF banking activities such as Home Credit, Moneta, currently number six in the Czech banking market, is closing in on the country's leading banks, all of which are in foreign hands.

In the attractive business with consumers and small businesses that Moneta focuses on, it places the subsidiary of the Austrian Erste Group (Sparkasse), Česká spořitelna, in second place.

Andreas Mihm

Business correspondent for Austria, East-Central and Southeastern Europe and Turkey based in Vienna.

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"The merger of Air Bank and Moneta will create the third largest bank in the Czech Republic in terms of customer numbers and number one in consumer finance," said Jean-Pascal Duvieusart, CEO of Home Credit and PPF shareholder.

One could now “write a new chapter in the history of the Czech banking system”.

The merger is a unique opportunity to drive innovation, offer first-class customer service "and develop new products on a scale that has never been seen before on the Czech market".

The bank's shares will continue to be traded on the Prague Stock Exchange.

The regulatory authorities of the Czech Republic, Slovakia and the EU have yet to approve the transaction.

According to analysts, the Czech banking market is not only highly competitive, but also attractive and profitable.

The cost-income ratio, which expresses how many cents are necessary to generate one euro of gross profit, was 40 percent last year, which is a remarkably low international comparison.

In Germany it is 72 percent, almost twice as much.

Improved takeover offer from PPF

There had been a bidding battle for Moneta. Austria's Raiffeisenbank International (RBI) had already rounded off its involvement in the Czech Republic with acquisitions such as Equa Bank and the ING private customer business. According to reports, the Viennese were also interested in Moneta. They had purposefully increased their equity stake. According to the share register, RBI, number five on the Czech banking market, was assigned 6.51 percent of the shares last week, compared with 5.72 percent two weeks earlier. The British Barclays Bank had almost doubled its stake to 8.62 percent during this time, while other major shareholders reduced their shares.

The activist investor Petrus Advisors tried to prevent the takeover.

However, well-known consulting firms such as Institutional Shareholder Services (ISS) and Glass Lewis had advised shareholders in recent weeks to accept PPF's takeover offer, which was improved compared to the summer and was also supported by Moneta management.

The perfect addition 

The specific process of the business that has now been resolved by the Annual General Meeting of Moneta Money Bank is complex. In a first step, PPF is selling its digital Air Bank and other activities in the Czech Republic and Slovakia to Moneta for 25.9 billion kroner or the equivalent of 1 billion euros. This finances the purchase price up to a maximum of one fifth from its own funds. The remainder will be provided by the issue of new shares to the value of 20.95 billion crowns (around 830 million euros) planned for May. With 255.5 million shares, this capital increase corresponds to half of the 511 million shares in circulation. Moneta shareholders can subscribe to a new one for every two shares at a price of 82 kroner. That is 7.25 kroner less than the Moneta rate was when it was announced. The remaining papers are issued at 90 crowns.PPF wants to buy up all of the remaining shares. On Monday the rate was 93 kroner.

With 2.5 million customers, around one in four of the 10.7 million Czechs is likely to be a customer.

Market insiders believe that Moneta and Air Bank complement each other well.

On the one hand there is the highly profitable Air Bank with a young, digitally oriented urban clientele and on the other there is Moneta, which has 154 branches in the country.

Their net profit rose in the first three quarters of the current year by 52 percent to 2.9 billion crowns (110 million euros), Air Bank had announced an increase of 17 percent to 1.95 billion crowns (77 million euros).

Austria's Erste Group had raised its target price for Moneta shares from 85 to 102 kroner last week.

Speculation about the consequences of the merger

It remains to be seen what consequences the reorganization will have for the Czech banking industry. Some experts expect less competition, especially in consumer credit, which has recently become cheaper. In the Czech Republic, as in most countries in Central and Southeastern Europe, German institutes play almost no role. In addition to Erste Group, the Belgian KBC through the commercial bank Československá obchodní banka and France's Société Générale through the universal bank Komerční banka are particularly active in the market. The Italian Unicredit and Russia's Sberbank are also involved there.

PPF operates in the financial services, telecommunications, media and technology industries in 25 markets in Europe, Asia and North America.

The group, headquartered in the Netherlands, had assets of 40.3 billion euros in the middle of the year.

Its founder, billionaire Petr Kellner, was killed in a helicopter crash in Alaska in late March.

In Germany, PPF has a stake in the eastern German lignite group LEAG.