Rietumu Banka said the board of Islandsbanki-FBA, the leading Icelandic bank, on Dec. 4 approved the purchased 56.2 percent of shares in Rietumu Banka. The value of the deal and the investment by the Icelandic bank is some $27 million.
"Thus, Islandsbanki-FBA will become a Rietumu Banka's shareholder after permission from the Bank of Latvia is received, a detailed study of the bank is completed, and the deal's documents are made," Rietumu Banka said in a statement.
Full completion of the deal is expected in January 2001.
Rietumu Banka's main focus is corporate banking rather than the retail market. "We were looking for an investor with a similar focus who wanted to get into a growing market rather than buy the branch network," Rietumu Banka president Michael Bourke said.
Rietumu Banka also said it will not be integrated into the structure of the Icelandic bank but will continue operations as a separate entity although Islandsbanki-FBA is purchasing more than 50 percent in Rietumu Banka. The bank's previous shareholders and management will retain an active role in the bank's management.
The terms of the deal also endow the previous shareholders with decisive voting rights in important matters.
"We are very satisfied that we have succeeded in finding such an experienced financial institution, which is so close to the specifics of our operations, as the strategic investor for our bank. Attracting of Islandsbanki-FBA's capital and know-how is one step on the way to the gaining a leading position on the Baltic states corporate clients market," Bourke said.
Rietumu Banka services mainly local clients, as well as "selected clients" dealing with transit and oil businesses from the CIS area who "look for a Western-style bank they can trust", Bourke told The Baltic Times. The bank has learned its lesson from the 1998 financial crisis in Russia, he said, and "it doesn't lend outside Latvia." The bank's expected profit for the year 2000 is 4 million lats ($6.5 million), he said.
Islandsbanki-FBA was established May 15, 2000 through the merger of Islandsbanki and the investment bank FBA. Following the merger a bank with $2.9 billion in aggregate assets was formed.