Intesa doubles Romania presence by buying small lender First Bank

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- Italy's Intesa Sanpaolo ISP.MI said on Monday it had bought Romania's First Bank from U.S. private equity fund JC Flowers, a week after crosstown rival UniCredit CRDI.MI also announced an acquisition in the eastern European country.

As part of an asset management and insurance deal with Alpha Bank, which will see UniCredit buy the Greek state's 9% stake in the lender, the Italian bank also bought Alpha's Romanian business to merge it with its local unit.

The profitability of Romania's banking system is above that of the euro area, with a 12.1% return on equity, the European Commission wrote in its country report in May.

"Given ... solid fundamentals and positive medium term growth prospects, Romania continues to attract large foreign direct investment inflows," it added.

Intesa gave no financial details for its deal, saying only that First Bank had 40 branches which served small and medium-sized businesses as well as retail clients with 1.5 billion euros in assets.

The investment will double Intesa's presence in Romania, where its local unit has 60,000 customers and 34 branches, with 1.5 billion euros in assets. Intesa Sanpaolo has been present in Romania since 1996.

Backed by a 300 million euro investment, the merger of UniCredit Romania with Alpha Bank Romania will create the country's third-largest bank accounting for 12% of total assets.

Despite economic growth moderating at present as the government seeks to rein in the budget and current account deficit, Romania is expected to grow the most among central European countries in 2023, according to BNP Paribas analysts.

"In 2024 and 2025, the Romanian economy should recover and then gradually converge towards its estimated potential growth of around 3.5% in the medium term," they wrote in a July report.

"Despite the size of current account and budget deficits, Romania continues to attract foreign capital flows," they added.

(Reporting by Valentina Za, editing by Deepa Babington)

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