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VÚB sale closer with EBRD/IFC move

A succesful sale of Slovakia's second largest bank, Všeobecná úverová banka (VÚB), moved a step closer January 4 with news that negotiations with the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) on taking a minority stake in the bank were close to conclusion.
Saying the sale of a 20% to 25% stake in the bank as close to conclusion Juraj Renčko, head of the coordination unit for banks' privatisation at the Finance Ministry, said that the two banks' involvement in VÚB would bolster the government's chances of carrying through a successful privatisation.


The EBRD and IFC are close to taking a 20 to 25% stake in VÚB. But some analysts have said the move is a sign of poor interest in the bank.
photo: Ján Svrček

A succesful sale of Slovakia's second largest bank, Všeobecná úverová banka (VÚB), moved a step closer January 4 with news that negotiations with the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) on taking a minority stake in the bank were close to conclusion.

Saying the sale of a 20% to 25% stake in the bank as close to conclusion Juraj Renčko, head of the coordination unit for banks' privatisation at the Finance Ministry, said that the two banks' involvement in VÚB would bolster the government's chances of carrying through a successful privatisation.

"We have asked them to take the stake because we want to privatise VÚB in two phases, and through these institutions we want to support the privatisation of VÚB. The EBRD and IFC are interested in supporting structural reforms in countries like Slovakia. We believe that they can help in the marketing phase of the privatisation," Renčko said.

He added: "Their presence in VÚB will also bolster the bank's internal restructuring process, and they could offer a majority shareholder more reassurance regarding VÚB's economic state."

The presence of the two institutions, who will take posts on VÚB's supervisory board, is expected to reinforce the bank's image as a well run and stable finance house and reassure any potential buyers that VUB's management is of the highest quality.

The EBRD's involvement in the Czech bank Česká spořitelna prior to its sale early in 2000 was viewed by many experts as crucial to what was eventually a successful sale. In taking a minority stake and management posts the EBRD was, many inside the Czech bank say, key to guiding the bank through the privatisation.

EBRD and IFC representatives declined to comment on the stake, however, sources close to the deal said that it was "in its final stages but subject to final agreements".

Analysts have said that in selling the stakes to the two institutions, VÚB can begin to prepare itself for its privatisation.

" VÚB is the second biggest bank in Slovakia but it is a huge organisation which needs reforms in almost all areas of its activities. These reforms will not come solely from the EBRD or IFC, but their entry into the bank will be a trigger for them," said Martin Kabát, head of analyses at Slávia Capital brokerage house.

Following what was widely received as a highly successful sale of an 87% stake in the country's largest finance house, Slovenská sporiteľňa (SLSP) for 18 billion crowns ($391 million), the government will be looking to repeat the success. It is hoping to off-load its entire 94% stake in the bank some time before the end of June, leaving a single investor to take what is left after the EBRD and IFC take their shares.

However, questions have already been raised as to which banks will be bidding for VÚB following the SLSP sale, with one of the banks which lost out in the SLSP sale, Bank Austria, already having said it would not take part in a tender for VÚB.

"The fact that the EBRD and IFC are here [involved in the sale of VÚB] is not good. In fact it means that the government cannot sell the bank directly to an investor, that in fact there is no interest in VÚB. The EBRD and IFC are really just a bridge for the government in a difficult period," added Kabát.

Renčko, however, denied that there was a lack of interest in the bank, saying that so far, 10 parties had expressed interest or that the EBRD and IFC's presence was an indication of problems in selling the bank.

"It is true that markets have viewed this bank as weaker and in worse shape [than SLSP]. But there are already other instances of the EBRD's involvement in other countries in the region. For example it owns a minority stake in Česká spořitelna, so it's presence in VÚB is nothing too out of the ordinary," he added.

Despite the concerns, though, the financial performance of VÚB over the last 12 months bodes well for its future. Having recorded non-consolidated loss of 9.487 billion crowns for 1999 following a similar-sized loss in 1998 the bank is expected to record a profit for 2000 well above its own projections from the start of last year of 100 million crowns. At the end of 1H2000 VÚB reported a gross profit of 140.5 million crowns, climbing to 319 million at the end of September.

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