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Interest in SLSP high despite criticism within sector

Despite government claims that a planned international tender at the end of this month for the country's largest bank, Slovenská sporiteľňa (SLSP), has attracted massive international interest, ministers are having to fend off criticism from within the banking community that their privatisation plans have gone awry.
The head of Ľudová banka, Jozef Kollár, said June 1 that the government had lost its way with its privatisation programme for banks. "For now it is clear that it is impossible to keep the timetable for privatisation set by the Slovak cabinet," Kollár said.
The government last autumn outlined plans for privatising three state-owned banks: Investičná a rozvojová banka (Investment and Development Bank - IRB), SLSP (Slovak Savings Bank) and Všeobecná úverová banka (General Lending Bank - VÚB).


Slovenská sporiteľňa (pictured above) is expected to be the target for some of the industry's foreign giants.
photo: Aleš Kurlý

Despite government claims that a planned international tender at the end of this month for the country's largest bank, Slovenská sporiteľňa (SLSP), has attracted massive international interest, ministers are having to fend off criticism from within the banking community that their privatisation plans have gone awry.

The head of Ľudová banka, Jozef Kollár, said June 1 that the government had lost its way with its privatisation programme for banks. "For now it is clear that it is impossible to keep the timetable for privatisation set by the Slovak cabinet," Kollár said.

The government last autumn outlined plans for privatising three state-owned banks: Investičná a rozvojová banka (Investment and Development Bank - IRB), SLSP (Slovak Savings Bank) and Všeobecná úverová banka (General Lending Bank - VÚB). In a three stage plan, the banks were to have had their loan portfolios cleaned up through a transfer of classified and bad loans to two hospital institutions, Konsolidačná banka and Slovenská konsolidačná, and then to have been readied for privatisation which the government planned for the end of this year.

However, the initial end-year date for the sale of both SLSP and VÚB looks increasingly unlikely to be met.

"The bank's privatisation process could be completed at the end of this year, but also by the end of the first quarter of next year," Finance Minister Brigita Schmögnerová said June 5, adding that SLSP's privatisation this year was particularly uncertain.

But Johannes Kinsky of J.P. Morgan, financial advisors for the government on the sale, said that so far the privatisation was progressing smoothly and that he foresaw no problems with the sale of the stake.

"We have registered concrete interest from between four and five buyers," he said. "In a typical privatisation like this you could expect the announcement of the winner of the tender at the end of this year. We are very pleased with the interest registered so far."

Despite the privatisation lag, interest in SLSP has indeed been growing. Austrian financial house Erste Bank, already a major central European player with its recent purchase of the Czech bank Česká sporiteľňa, has said that it is interested in taking the state's stake and pulling SLSP into its network of savings institutions across central Europe.

SLSP head Dušan Jurčák said June 1 of Erste's interest: "Erste Bank is the kind of investor that, considering its orientation, we would like to see in Slovakia."

Schmögnerová was reluctant to comment on the initial interest, but said: "We have received a high [level of] interest from foreign bidders. There are investors interested in SLSP from both inside and outside Europe. We have received offers and [potential] bidders have given notice of their interest."

She added that the support of the US for Slovakia's entry into the Organisation for Economic Cooperation and Development (OECD), combined with recent encouraging Slovak macroeconomic figures, had given a filip to foreign interest in the bank's privatisation.

"The reasons behind the interest lie in our OECD entry, higher economic growth than we had expected and the existing presence of foreign banks in Slovakia's banking sector," said the minister.

Erste Bank's announcement is expected to create a wave of interest, with other European banking giants heading the field. However, the interest of financial institutions outside Europe has come as a surprise.

"Originally it was thought that most of the participants in any bidding would be the same as those who had been bidding for banks in the Czech Republic [Deutsche Bank, Erste Bank, BNP and KBC among the most high-profile so far - ed. note] but this news is really surprising," said Michal Kustra of Tatra banka.

The analyst added that the government would not be looking just at the best price for its 87% stake in SLSP, but also to send a signal to the international community for future privatisations.

"This, along with the privatisation of Slovenské telekomunikácie, is the flagship privatisation for the government. If they can do this well and smoothly it will send the right message to investors," Kustra added.

The government needs an image boost after criticism for its handling of the banking sector in general, with smaller domestic banks such as Priemyselná banka, AG banka and most recently Slovenská kreditná banka (SKB) all being put under caretaker administrations by the central bank within the last 12 months.

Both Ľudová banka's Kollár and SLSP's Jurčák have criticised the Slovak system for protecting bank depositors in the event of crashes or mismanagement. Following the collapse of SKB in May, the central bank declared that commercial banks would henceforth contribute a special levy of 0.3% of the average amount of protected deposits in Slovak banks into the Deposits Protection Fund - a fund already short of cash after a 1.7 billion crown payoff for protected deposits at AG banka.

SLSP payments to the Deposit Protection Fund are expected to wipe out the institution's operating profit for the first quarter of this year. The Deposit Protection Fund will pay out more than 4 billion crowns to SKB clients for their protected deposits.

"It's far from a market economy," Kollár said of the contributions to the Deposits Protection Fund, adding that more stringent supervision of the banking sector was needed with earlier interventions by the central bank to prevent a repeat of the SKB collapse in other similar-sized banks.

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