EBRD and KfW Entwicklungsbank acquire stake in MegaBank

By Anton Usov

The European Bank for Reconstruction and Development and KfW Entwicklungsbank (The German development bank) are providing a financing programme worth up to €28.9 million to MegaBank - one of the strongest regional banks in the eastern Ukraine.

The programme envisages joint acquisition by EBRD and KfW of up to thirty per cent of shares in MegaBank, a senior loan of an equivalent of €10.4 million from EBRD and a subordinated loan of an equivalent of €2.5 million from KfW. It will support MegaBank’s liquidity position and capital base in this period of continuing banking market turbulence in Ukraine. The other objective of the transaction is to provide MegaBank with long-term funding for on-lending to local borrowers as soon as the market stabilises.

As part of this deal, as well EBRD as KfW are organising a technical assistance programme in a total amount of up to $0.9 million aimed at improving MegaBank’s risk management.

Through this project the European Bank is continuing its support to the Ukrainian banking sector. It has already provided finance to banks worth over $500 million since the beginning of the year. In this particular case the support will be provided through additional capitalisation of a strong medium-sized local bank of a regional importance with a strong potential to become a significant national player.

KfW´s commitment is part of the bilateral German-Ukrainian Financial Co-operation which started in 2003. KfW is realizing the investment in Megabank on behalf of the German Federal Government within the framework of a €30 million “Ukrainian Banks Assistance Programme”, which is being implemented in 2009. The Programme’s objective is to support medium-sized Ukrainian banks mainly involved in SME lending. In addition to the equity investment, KfW will continue supporting the Ukrainian banking sector through further refinancing lines as well as technical assistance, especially in the field of anti-crisis measures.

KfW was founded in 1948 as a corporation under public law with its headquarters in Frankfurt am Main. KfW is Germany’s leading promotional bank for the domestic economy as well as for developing and transition countries. KfW's capital is held 80% by the Federal Republic of Germany and 20% by the German federal states (Länder). With a balance sheet total of EUR 408 billion (30.06.2009) KfW is one of Europe's largest banks. KfW has been operating in Ukraine under the TRANSFORM Programme since 1992 and has also been implementing Financial Cooperation with Ukraine on behalf of the German federal government since 2003. So far around EUR 260 million has been committed mainly in the areas of energy efficiency, the financial sector (first of all promotion of SME lending), social and municipal infrastructure. Visit KfW’s website: www.kfw.de

OJSC MegaBank was founded in 1990. MegaBank is a leading commercial bank in the Kharkov region of Ukraine. It is a middle-sized universal commercial bank, which occupies the 47th position among all Ukrainian banks in terms of assets. It has a regional network of 191 branches in 25 regions of Ukraine. MegaBank offers a full range of banking services to over than 350 thousand customers country wide. It also offers a unique utility bills payment technology within the Unified Settling Centre (USC). More information is on the website: www.megabank.net