The NBS wants to be a part of the Czech government ČSOB sale.
photo: Vladimír Hak -Profit
On April 21, the Czech government received three offers - from German Deutsche Bank, Hypovereinsbank and Belgian KBC Bank - for a 66 percent stake in ČSOB, one of the country's largest state-owned banks which is also active in the Slovak market. The Czech media have reported that the investors may be offering over $1 billion for the stake.
No mention was made, however, of including the 24 percent stake the NBS owns in ČSOB as part of the sale. The NBS inherited that stake from the division of federal property in 1993.
The sale of the ČSOB share to a foreign investor could bode poorly for the Slovak national bank, as once an investor acquires a majority in ČSOB, the Slovak minority stake may command a much lower price, analysts say. Since the NBS stake falls short of a controlling stake, the new owner would be able to make changes in company rules and increase the bank's basic capital, further diluting the Slovak stake.
"The NBS is displeased with the approach of the Czech ČSOB shareholders," NBS Governor Vladimír Masár told a news conference last week. "It is unacceptable for the NBS to be left out of the process," he said, adding the central bank was ready to fight in court if an agreement with the Czech shareholders could not be reached.
Repay old debts
The NBS bases its claim that the ČSOB is acting unjustly on a 1993 consolidation agreement signed by key ČSOB shareholders. The parties had agreed on raising the bank's equity capital in order to be able to privatize the bank effectively in the future. The agreement also contained a clause that the four key shareholders, which included the Slovak central bank, would work together in selling their stakes.
But the Czech Finance Ministry, National Bank and the National Property Fund, who jointly own almost 66 percent of ČSOB, have since decided to condition Slovakia's participation in the deal on repayment of an old debt owed to ČSOB. In 1993, Slovenská Inkasná Jednotka, a Slovak state-owned collection unit, took up responsibility for a portfolio of bad ČSOB loans in exchange for a loan from ČSOB. Though it effectively guaranteed repayment, Slovenská inkasná ceased paying money back in 1995. The Czech shareholders are indirectly holding the NBS responsible for the now 15.5 billion crown debt, while the NBS argues that the debt is the responsibility of the Slovak state.
In order not to hinder the ČSOB privatization, the Czech government earlier agreed to guarantee the repayment of the Slovak debt to the bank. But the Czech shareholders say they still fear their own government will have to cover the loan. Because the NBS says the loan and ČSOB privatization are unrelated, the two parties are waiting for a decision of an international arbitration court in Washington.
Last week, Governor Masár and Finance Minister Brigita Schmögnerová met representatives of all three foreign banks interested in ČSOB to try to convince them to also buy the Slovak stake. A central bank statement following the meeting made no indication of progress
Masár had also asked the ČSOB board to allow the NBS to sell the shares separately, but failed. In response, the NBS has called a late May shareholder meeting at ČSOB to take place to try to sort the issue out. Czech banking laws mandate that permission is needed both from the ČSOB supervisory board and from the Czech central bank for the Slovak stake to be sold separately.
The Slovak central bank has one other argument to convince the potential investor to buy its ČSOB share. ČSOB is seen as a convenient entry way into both the Czech and the Slovak banking market. Since the Slovak central bank acts as the regulator of the banking sector, the new owners may wish to stay on good terms with it.
Otherwise, the NBS governor said, the central bank is even is ready to sell the stake to several smaller investors. He said the potential valuations of the divided-up stake vary widely, but would in analysts' view likely be far below the price the Czech shareholders will get.
3. May 1999 at 0:00 | Simon Adamek