Vilniaus Bankas starts new year on right foot

VILNIUS - If the holiday rest was not enough to bring some cheer to Lithuania's largest bank, Vilniaus Bankas, decisions made by the country's competition agency and the Bank of Lithuania were sure to do the trick.

The former gave its permission on Christmas Eve for Vilniaus to acquire 43 percent of a share package in the second largest bank, Hermis. A week later, the central bank gave a Swedish bank the green light to take a 32 percent stake in Vilniaus. The decisions came as a shock to no one, and Vilniaus Bankas welcomed them.

The Lithuanian State Competition and Consumer Rights Protection Council reported that if Vilniaus Bankas should acquire a 43 percent share package of Hermis, the move would fall in line with Lithuania's Law on Competition. Mergers which result in the control of 70 percent or more of the market are not allowed, according to the law. Estimates say that a purchase of the stake in Hermis would give Vilniaus about 40 percent of the market.

Vilniaus Bankas sought the central bank's permission to purchase a 43 percent stake in Hermis last spring. The central bank's lethargic response and opposition to the idea expressed by Hermis' management prompted Vilniaus to eventually back down.

Vilniaus Bankas officials nevertheless maintained that their plan was prudent. Vilniaus Bankas Marketing Department Director Alexander Federas said the bank is now just more or less testing the waters and that many more steps are required before it actually buys the shares.

"I think the central bank just needed time to settle procedures," said Federas. "Our bank was never told 'no' by the central bank. They just made a decision to postpone the final decision. So we'll see what happens now."

Analysts are once again showing excitement about the prospect of a Vilniaus-Hermis duo.

Lithuanian Banking, Insurance and Finance Institute Director Eugenija Martinaityte told TBT that employees from both banks are being trained at the institute.

"They all come here to communicate, share and obtain knowledge," said Martinaityte. "I think it is natural that [Hermis'] management would be reluctant to share power. But then again, they are clever people and will see that a merger would be very positive for both banks. This is not a one-day process, but I think [Vilniaus Bankas' continued interest] is an excellent decision. It will also prove to be good for the customers as well."

Sweetening up to Swedes

In late November, Sweden's Skandinaviska Enskilda Banken swept into the Baltic banking market in a whirlwind fashion. After nailing down a one-third stake in Latvia's Unibanka and Estonia's Uhispank, SEB got the same amount of Vilniaus by gobbling up a new issue of 4.8 million shares.

The only two formalities which remained for completing the deal were polished off in late December. Approval by Vilniaus Bankas' share holders and the central bank was collected as expected and the deal was sealed.

Federas nevertheless sounded gleeful when supplying a recap and the details. He said SEB's total investment would come to 220 million litas ($55 million).

"Before the central bank's approval, Vilniaus' share capital was registered as 102 million litas. Now it will be raised to about 150 million, and the new figures will be reflected in the annual report," said Federas.

All in all, it appears Vilniaus Bankas has kicked off the new year in an exciting way.