On Oct. 22, the Estonian newspaper Postimees reported that Skandinaviska Enskilda Banken requested permission from Eesti Pank, the central bank of Estonia, to purchase a third of Uhispank stock, a bank that some people say is experiencing financial problems.
Many market observers said they looked favorably on SEB purchasing a major stake in Uhispank.
"I think if it happens, it will be a very positive development," said Toomas Reisenbuk, a banking analyst with Hansa Investments.
According to the report, SEB filed their request Oct. 19. However, at this point, none of the parties involved in the report will confirm or deny whether it is accurate.
"We have no comment. We will say something about this after Uhispank says something," said Andrus Kuusmann, spokesman for Eesti Pank.
Representatives for both Uhispank and SEB were equally noncommittal.
"We do not wish to comment on these negotiations," said Eero Raun, spokesman for Uhispank. In a report by BNS, a spokesman for SEB said that it was not the policy of the bank to comment on ongoing negotiations and that SEB had already announced its plan to expand into the Baltic market. "Nothing more detailed can be said at the moment," said the spokesman, Sten Tornsten.
If SEB does end up becoming Uhispank's strategic investor, many market observers would consider it a much-needed shot in the arm for Estonia's second largest bank. Though few people would like to comment on the record, many in the banking sector have criticized Uhispank for being less than forthcoming about their financial situation.
"I don't think their loan portfolio is as good as they say it is," said one analyst. There has been a great deal of speculation that Uhispank is not as financially stable as they say. A strategic investor will give Uhispank the cash influx that many believe it needs to improve its reliability and standing in the banking sector. "Worst case scenario, the government will have to step in," was the way that one analyst recently described Uhispank's financial situation.
Others say that the situation at Uhispank is not too dire. Paavo Pold, an analyst with Talinvest Securities, said that Uhispank is financially sound and that much of the criticism directed against it is because the bank wasn't always as forthcoming about its financial transactions as the biggest bank in Estonia, Hansapank.
"I don't think there's any major flaws. It's their way of communicating with the market," said Pold, who pointed out that during Uhispank's merger with Tallinna Pank this summer, they did not make as many announcements or promote discussion.
Raun said that the bank did not wish to comment on rumors and "time will go on and show the facts." Only 3.3 percent of the bank's money has been lent to companies that do business in CIS countries, according to Margus Schults, vice-president of Uhispank. Schults also said that the bank sold the last of their Russian bonds in June, before the devaluation of the ruble made them almost worthless.
SEB is the second largest bank in Sweden, and it first showed interest in the Baltic banking market this summer.
SEB competed with Swedbank for Hansapank, at one point purchasing 18.6 percent of Hansapank shares. They sold their shares to Swedbank in early September for 275 million kroons ($21.2 million).
The discussions between SEB and Uhispank have been going on for months, according to a statement made by Lembit Kitter, a vice-president at Uhispank, to BNS. There had also been some speculation that one of the German banks would also make an attempt to purchase Uhispank stock and expand into the Baltic market.
If the deal becomes a reality, it would solidify the Swedish banks financial invasion of the Baltics and help SEB expand into Latvia and Lithuania. Uhispank has a partnership with Unibanka in Latvia and Vilniaus Bankas, the biggest bank in Lithuania, which might lead to a merger in a few years' time.
Trading of Uhispank shares was suspended on Thursday, Oct. 22, but resumed later that day when neither side would confirm the reports. If and when the deal is concluded, SEB and Uhispank would have to first notify the stock exchange.
The latest twist in the banking industry came after two bank closures in quick succession.
On Oct. 1, Eesti Pank moved to shut down EVEA bank after deciding that it could not be saved. The same evening Eesti Pank decided to purchase a majority share of Investeerimispank, which was in the process of a merger with Forekspank, in order to assist the merger process.
The next week, on Oct. 7, Eesti Pank decided to place ERA bank under its administration after the bank told Eesti Pank officials that they could not meet their deposits.