Expanded Rietumu group stakes out territory

  • 2001-03-01
  • Nick Coleman
RIGA - Announcing his bank's takeover of Saules Banka on Feb. 26, Rietumu Banka President Michael Bourke said the enlarged bank will continue to be a bridge for Western companies operating in Latvia and other countries in the former Soviet Union.

Rietumu signed a deal Feb. 23 to purchase 100 percent of Saules Banka from Estonia's Uhispank, a subsidiary of Sweden's Scandinaviska Enskilda Banken, said Bourke.

"We'll be putting our teams and heads together to build a stronger, united bank," he said. "Our focus will be to continue to provide the best service for our existing clients and to increase our profitability and market share together."

There will be "no significant changes at the top of Saules Banka," he said, adding that full integration will be complete by the end of 2001.

Bourke denied that Rietumu is threatened by the domination in the Baltics of Nordic banks such as Swedbank and SEB, which announced merger plans last week. Rietumu has a distinct role, he said.

"Decisions in Stockholm will affect everyone in Riga, but they're operating in a different market. We've never seen the Baltic ring as our market. Our focus is to provide a banking base in Latvia serving the growing Latvian corporate economy. Latvia is a gateway to a huge area of potential growth in Russia and Ukraine, to many wealthy countries which don't have good banking services."

Bourke refused to confirm the sale price of Saules Banka, which Business Baltija newspaper reported was 13.5 million lats ($21.7 million).

As a result of the deal the assets of the Rietumu Banka group, which also includes RB securities, will be worth 420 million lats. Saules Banka's audited 2000 profit was 2.25 million lats, while Rietumu Banka posted an unaudited profit of 4.01 million lats.

If, as expected, Latvia's Hansabanka and Unibanka merge under last week's deal between Swedbank and SEB, Rietumu would become Latvia's third largest bank, behind Parex Banka.

As consolidation fever grips Latvia's 22 banks the Saules Banka deal should help Rietumu stay afloat. A deal by which the Icelandic bank Islandsbanki-FBA, Iceland's largest, will purchase a 56.2 percent stake in Rietumu is close to completion, said Bourke.

But Rietumu's policies will continue to be shaped in Riga, he said. "It's been critical from the start that the Icelanders share the same business vision as us."

Despite the widespread perception that Russian business is riddled with corruption Rietumu will not be associated with such problems, he said.

"We're bankers, not policemen, but we don't scheme. To protect our reputation we must choose businesses and clients very carefully. We have very strict procedures governing who can open an account. We have mechanisms to monitor transactions and we visit clients to monitor their businesses."

Paavo Pold, banking analyst at Suprema Securities in Tallinn believes Rietumu's chances of success are good.

"If a third bank offers corporate clients an extremely flexible and good service there is definitely a niche. Most companies have accounts with several banks so they can constantly judge and compare products. There is definitely a niche if Rietumu can offer a good, reasonably priced service."

Companies doing business in the CIS are increasingly able to keep their hands clean, says Pold.

"This is not an extremely big issue nowadays. There is a reasonable amount of true and genuine business between Latvia and Russia," he said. "The Bank of Latvia has made a lot of effort to prevent corruption. If Rietumu has avoided money laundering and shady deals so far it will get easier and easier for them every day."