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Austria's BAWAG sets sights on IRB

News of the first publicly expressed interest in state bank Investičná a rozvojová banka (IRB) has boosted the government's privatisation plans for the financial house, as one month after a tender for IRB was launched Austria's BAWAG said it was stepping into the race.
Having failed in its bid to take a majority share in one Slovak bank, BAWAG said July 19 it was taking a closer look at the state's 69% stake on offer in Investičná, and had not lost interest in the Slovak banking sector. In May BAWAG missed out on a 51% share in the medium-sized bank Poľnobanka, losing out to Italy's UniCredito.
"IRB is one of a few investments we are looking at in Slovakia, principally in the banking sector," said BAWAG spokesman Peter Narkowitz. He added that despite IRB's financial woes, BAWAG viewed the Slovak bank's outlet network as attractive and saw IRB as a "good prospect".


The financially troubled IRB bank may finally have found a taker in Austria's BAWAG.
photo: Vladimír Hák

News of the first publicly expressed interest in state bank Investičná a rozvojová banka (IRB) has boosted the government's privatisation plans for the financial house, as one month after a tender for IRB was launched Austria's BAWAG said it was stepping into the race.

Having failed in its bid to take a majority share in one Slovak bank, BAWAG said July 19 it was taking a closer look at the state's 69% stake on offer in Investičná, and had not lost interest in the Slovak banking sector. In May BAWAG missed out on a 51% share in the medium-sized bank Poľnobanka, losing out to Italy's UniCredito.

"IRB is one of a few investments we are looking at in Slovakia, principally in the banking sector," said BAWAG spokesman Peter Narkowitz. He added that despite IRB's financial woes, BAWAG viewed the Slovak bank's outlet network as attractive and saw IRB as a "good prospect".

"It would be very difficult and costly to set up a completely new operation in Slovakia, and IRB has a very good network of outlets, which we find very interesting" Narkowitz said.

News of BAWAG's interest has quelled initial fears that no one would put in a bid for the troubled IRB. While the tender was officially opened on June 21, speculation at that time was already rife that bidding for IRB would be lacklustre and that there would be few takers for a bank still perceived to be in relatively poor financial health.

However, the Finance Ministry has said since launching the tender that the bank was proving an attractive proposition.

"We have a certain amount of interest and we are pleased and encouraged so far," said Richard Lysakowski, head of the bank privatisation unit at the Finance Ministry. He added: "We weren't sure initially how much interest would be shown, but the bank has gone through its restructuring process and the doctor has declared that the patient is recovering. IRB is moving forward."

IRB is the first of the three largest state-controlled banks (along with Všeobecná úverová banka - VÚB - and Slovenská sporiteľňa - SLSP) slated for privatisation, with its sale initially pencilled in for some time at the end of the third quarter of the year. BAWAG has ruled out any interest in the other two banks, focusing its acquisition strategies in the region on medium-sized banks such as IRB.

In December 1997 IRB was put under a caretaker administration by the central bank after finding itself unable to borrow anything on money markets to cover its obligations. The caretaker regime was lifted only at the end of last year, and despite a 15.2 billion crown ($344 million) government loan portfolio clean-up and profit of 12 million crowns ($271,000) last year, the interest of major banking players in the recovering IRB is still expected to be modest.

Unlike both SLSP and VUB, which are already known to have attracted some of the largest international financial institutions to their sale, IRB, partially due to its smaller size, is unlikely to draw the same response.

There are also fears that much of the bank's current capital could disappear with its sale. In late 1999, a consortium formed of SLSP, VÚB and insurer Slovenská poisťovňa deposited 7.8 billion crowns in IRB for six months, a term that was recently extended until October this year, in an effort to boost the bank's capital. Any potential buyer may find that the three state entities will pull their deposits out, leaving a large capital hole for an investor to fill.

"Slovakia as such is not that an attractive destination," said Miloš Bozek, analyst at J & T Securities in Bratislava. "If any banks have any interest in IRB at all they will be medium-sized. The brand itself [IRB] is not worth anything and it's possible that someone would buy it just for the licence and then enter the market as something else."

The deadline to enter the tender for the sale of an 87% stake in SLSP has been set as September 12 with the sale hoped to be completed in the first quarter of next year. The sale of VÚB is slated for completion in two parts, with an initial 17% share to be offered to either the International Finance Corporation (IFC) or the European Bank for Reconstruction and Development (EBRD) and a later sale of 67% to a strategic investor.

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