Estonia's born-again bank starts fresh

TALLINN - After being sntached from the jaws of bankruptcy by the government, Optiva Bank is enjoying a new beginning. Last week, the third largest Estonian bank after Hansapank and Uhispank announced it will concentrate on corporate banking providing services to companies engaged in international business.

Optiva was founded as a result of a merger between Investeerimispank and the deeply troubled Forekspank, and the state had to bail it out of bankruptcy in October, buying a majority stake in both banks.

The Bank of Estonia now controls 58 percent of the shares in the new bank, and Investeerimispank and Forekspank shareholders control 28 percent and 13 percent respectively.

After the merger, Optiva will be able to serve as a principal bank to clients who have only used either of the banks as providers of a limited number of services. Investeerimispank used to offer investment and consulting services to corporate clients and Forekspank provided a full range of services to small and medium-sized companies.

Optiva is primarily looking for companies engaged in export and import transactions, for whom the bank is able to offer the best service through uniting Investeerimispank's experience in financing export-oriented projects and Forekspank's skills in international payments and giving loans to exporting and importing companies.

Neither Forekspank nor Investeerimispank alone would have been able to compete on the fast consolidating Estonian market.

"The limited amount of owner's equity, which was decreased by big losses, did not allow us to develop as fast as was necessary," said Ranno Pajuri, director of marketing communications at Forekspank. "The merger was also necessary in terms of competition on the market. It is more difficult to compete alone than it is together."

Forekspank's inadequate capital was a restraining factor in financing major investment projects. Forekspank incurred a 250 million kroon ($18.5 million) loss due to the crisis in Russia and slipping share prices. Investeerimispank managed to earn a 15 million kroon profit, but the newly found Optiva bank predicts a 220-million kroon loss for 1998.

In addition to traditional banking operations, Optiva Bank will also be providing consulting services using the respected long-standing experience of Investeerimispank. The bank announced its decision not to build a wide office network, but to develop on-line services instead.

As soon as the merger is completed the bank might throw a fishing line for a strategic international investor to ensure long-term positions in the domestic market and expand to neighboring markets.

Through a strategic investor Optiva Bank hopes to obtain know-how of western banking and establish international partnership contacts as well as improve access to international finance markets.

Pajuri said the bank's share capital after the stock issue to Investeerimispank's shareholders will amount to about 413 million kroons.

The Bank of Estonia, which bought the shares of the troubled banks this year, has decided to sell its stake to a strategic investor before the end of next year.

At the end of October Investeerimispank's and Forekspank's assets amounted to 1.7 billion kroons. After the merger the new bank's assets are estimated to be about 3.957 billion kroons.

For 1999, Optiva Bank predicts an increase in assets to 4.7 billion kroons, and by 2000 the assets are expected to reach 5 billion kroons.