Vilniaus Bankas wraps up Swedish deal

  • 1998-12-03
  • Paul Beckman
VILNIUS - Officials from Sweden's Scandinaviska Enskilda Banken and Vilniaus Bankas put the finishing touches on a deal Nov. 27 that gives the Swedes a 32 percent stake in Lithuania's largest bank.

But SEB said it has no plans to increase its holdings in Lithuania, unless the price is right.

"We don't have any plans to increase it, but we also probably wouldn't say 'no' if someone came and offered us some at a good price," said Lars Gustafsson, head of SEB's strategic planning department.

"On the other hand, I want to state again that we don't want to own 100 percent. We want Vilniaus Bankas to be a local bank with shares quoted on the National Lithuanian Stock Exchange."

Having already nailed down approximately the same percentage of shares in Vilniaus Bankas' cooperation partners, Latvia's Unibanka and Estonia's Uhispank, SEB has emerged as a giant player in the Baltic banking market.

The Swedish heavyweight plans to grab the Lithuanian bank's entire new issue of 4.8 million shares at a price of 46 litas ($11.2) apiece. The Swedish bank's overall investment in Vilniaus Bankas is expected to exceed 220 million litas. Although the deal came as no surprise, the atmosphere at the banks' joint press conference at Vilniaus Bankas headquarters was energetic.

"We were very excited in our bank when we had signed this agreement, confirming an investment in all three Baltic countries," said Gustafsson. "The purpose of these investments is to expand our home market, so we can combine Baltic banking with local banking. We think that being local is the key to this investment."

Gustafsson said the bank previously mulled over the idea of launching branch offices in the region, but finally decided the advantages of investing in existing banks with "good management and a strong position" in the Baltic market would be more prudent.

"This is only [the beginning]," Gustafsson assured. "This is a long term investment from our side. We can see that we can help develop both Vilniaus Bankas and the banking market in Lithuania. We are hoping that we can show other Nordic companies that it is [worthwhile] to invest in Lithuania. I would even go so far as to say it might have a positive effect on foreign investment in Lithuania, not only from the Nordic countries, but from other countries."

Julius Nievardas, Vilniaus Bankas' board chairman, also had nothing but positive comments to offer. He stressed that clients and shareholders will benefit from the increased safety measures. Both of the partnership representatives said they were looking forward to bumping Vilniaus Bankas up to a serious Western-styled bank, which is able to meet any international standard thrown at them.

No Baltic merger

Now that SEB has obtained a significant stake in three major Baltic banks, which had already latched onto a cooperation agreement among themselves, observers are wondering if and when a merger will surface. Gustafsson, however, quickly deflated the idea.

"We have no plans to merge the three banks and have no interest in any other banks in the area," he said.

SEB's current intentions in the Baltics do not, of course, hinder Vilniaus Bankas officials from considering such options. This past spring, the Lithuanian bank expressed its intention of acquiring a 43 percent stock package with 50 percent voting rights in Lithuania's second largest bank, Hermis. Officials later cancelled such plans due to what they called a negative reaction from Hermis officials and the central bank's lethargic response to their request for permission.

At the press conference, Nievardas said Vilniaus Bankas would still leave such an option open, if the central bank allowed the purchase of a stake in Hermis. Still, he said it's too early to discuss it at the moment.

"It is not simple to predict what would happen if the central bank gave its permission," said Nievardas.

While such future options remain fuzzy, the near future seems fairly clear-cut. Vilniaus Bankas shareholders are expected to support the new issue in a meeting scheduled for the end of December.