Austrians Train for Big Race
As zero hour for the creation of a single European market draws near, Austrian banks want to get in on the action as well as protect their turf.
Their strategy? Call it merger mania.
With Austria likely to join the EC in a few years, analysts say, the stakes are simple. Either the country's banks build cost-efficient, world-class institutions, or they risk losing to larger European banks both home-market share and opportunities for expansion abroad.
So, the race is on. Austria's third- and fourth-ranking banks announced earlier this year plans to merge in September. Several others have indicated they may be quick to follow.
A Problem of Size
"Austrian banks are big enough for Austria but they may not be large enough to do international business," said Dietmar Spranz, a director with the Austrian central bank.
"The perception in Austria is that the banking system is too fragmented and would be better off with larger, stronger institutions," said David Marshall, a banking analyst with IBCA Ltd. in London.
The hope is that the mergers will help banks to shave hundreds of millions in expenses and build up their international business, at least in Europe, if not further abroad.
The planned September merger between $27 billion-asset Oesterrreichische Laenderbank and $24.2 billion-asset Zentralsparkasse und Kommerzialbank will form Austria's second biggest bank, said Gerhard Randa, Oesterreichische Laenderbank's chief executive officer. Currently, the banks are the country's third- and fourth-largest, respectively (see table on this page).
Others Mull Mergers
Two other Austrian banks, current No. 2 Girozentrale und Bank der Oesterreichische Sparkassen AG and Erste Oesterreichische Spar-Casse-Bank, are also said to be considering a merger. And observers note that a third, Creditanstalt Bankverein, the country's largest bank, is mulling a merger with three, affiliated regional banks.
The regionals are Bank fuer Oberoesterreich, Bank fuer Tyrol und Voralberg, and Bank fuer Karnten.
Analysts say conditions are ripe for mergers by Austrian banks. For one thing, the country is heavily overbanked with around 5,600 bank branches, or one branch per 1,600 people. that compares with one branch per 5,680 people in France, and one branch per 9,382 people in Germany.
Two Are Active in U.S.
Only two Austrian banks, Creditanstalt and Laenderbank, have significant operations outside the country. Both have been expanding in the United States - where they have leasing, asset-management and corporate-lending operations - and in Eastern Europe.
With Eastern Europe's economy sagging, and the United States still in a recession, the banks are cautious about expanding their international operations. But bulked-up institutions formed through mergers may be better prepared to take on new risks.
The prospective marriages have received Vienna's blessings. The government, which holds majority ownership in the country's main banks, has been informally advising institutions that it thinks the mergers an efficient way trim costs.
"We think that the banks can find synergies," said the central bank's Mr. Spranz.
PHOTO : GERHARD RANDA, head of Oesterreichische Laenderbank.