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IRB defends 1Q loss as due to restructuring

Management at state bank Investičná a rozvojová banka (Investment and Development Bank - IRB) May 11 defended a first quarter loss of 47 million crowns ($980,000) as a result of structural and organisational changes.
"Our organisational changes have been costly. We have laid off 240 employees, entailing redundancy costs and restructured loans. These have been the main causes behind the loss," said Iľja Iliť, director of the bank office at IRB.
Announcing the results, IRB chiefs pointed out that the bank had repaid large debts. The finance house repaid a 3.8 billion crown ($79 million) deposit to a consortium of Slovak financial institutions for an earlier loan, using the proceeds from a government sale of restructuring bonds from its portfolio to make the payment. They also pointed out that IRB had improved on a 117 million crown loss in the same period of 2000.

Management at state bank Investičná a rozvojová banka (Investment and Development Bank - IRB) May 11 defended a first quarter loss of 47 million crowns ($980,000) as a result of structural and organisational changes.

"Our organisational changes have been costly. We have laid off 240 employees, entailing redundancy costs and restructured loans. These have been the main causes behind the loss," said Iľja Iliť, director of the bank office at IRB.

Announcing the results, IRB chiefs pointed out that the bank had repaid large debts. The finance house repaid a 3.8 billion crown ($79 million) deposit to a consortium of Slovak financial institutions for an earlier loan, using the proceeds from a government sale of restructuring bonds from its portfolio to make the payment. They also pointed out that IRB had improved on a 117 million crown loss in the same period of 2000.

But the finance house's red figures came after closing 2000 with a 24 million crown profit and just weeks before its planned privatisation. It also stood in contrast to the 433 million crown first quarter profit which fellow state-controlled bank Všeobecná úverová banka (General Lending Bank - VÚB) recorded just two weeks earlier.

Both banks are due to be privatised by the end of June and interested foreign parties are carrying out due diligence procedures, which involve close scrutiny of the banks' books. But while VÚB has attracted French bank Societe Generale and Italy's Banca Commerciale, IRB has seen only one serious offer, from Hungarian bank OTP, and the Finance Ministry has pushed its sale conclusion back from a planned third quarter of last year to the June date this year.

IRB was put under forced administration in late 1997 after running into liquidity problems, and an excess of bad loans in its portfolio saw the state transfer nearly six million crowns in bad debt to a state hospital bank prior to its planned privatisation. But unlike VÚB it has a small market share at just 3% of the retail market, and is seen as an unattractive proposition for sale.

However, OTP managers have said that they believe a foray into the Slovak market can win them Hungarian customers in Slovakia. The Hungarian oil giant MOL holds a 36% stake in Slovak oil refiner Slovnaft and is expected to up that to a majority holding soon.

Analysts believe, though, that while some of IRB's announced loss may be due to internal restructuring and organisational changes, the bank's financial position means that it cannot survive much longer without an investor.

"The bank may have invested in some structural changes, such as new technology etc. But I don't see how IRB can go on much longer. Getting an investor is the only way it can stay afloat," said Tomáš Kmeť, analyst at recently-privatised Slovenská sporiteľňa (Slovak Savings Bank - SLSP). "It's been hard to sell, and it desperately needs a buyer."

However, IRB's Iliť insisted that the restructuring that caused the loss would actually improve the bank's future, making it more valuable to its eventual privatisers.

"These changes have been made quickly and with upcoming privatisation in mind. We are sure that by carrying them out we have created solid foundations for results in future periods to be much better," he said.

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