German bid revives hope for sell-off

  • 2001-11-22
  • Bryan Bradley
VILNIUS - Privatization of Lietuvos Zemes Ukio Bankas was on the brink of collapse until Germany's Norddeutsche Landesbank improved its offer for the country's last state-owned bank this week.

NORD/LB now says it hopes to finalize the terms of a deal as early as December. The Nov. 15 announcement came two weeks after Lithuania's privatization authorities discarded the company's initial bid - the only one submitted in this fall's tender for a 76.01 percent stake in Zemes Ukio Bankas.

On Nov. 15 the German bank said it would amend some conditions in its application and raise its offer price and future investment commitments. In response Lithuania's State Property Fund immediately named NORD/LB the winner of the tender and invited the company to start direct negotiations in the first week of December.

"Our offer indicates that NORD/LB wants to play an active role in the ongoing consolidation of the Baltic banking market, and that we consider Lithuania a very promising market," said Sven Herlyn, executive vice president at NORD/LB.

Zemes Ukio Bankas' focus should become corporate and retail banking, he said.

This would be the German bank's largest investment to date in the Baltic states. It opened a branch in Vilnius in 1999, became the strategic investor at Latvia's Pirma Banka in 2000 and is now establishing a representative office in the Estonian capital.

NORD/LB said Trigon Capital, which acted as a consultant in its bid for the Lithuanian bank, had predicted that a knock-on effect would be an increase in German direct investment in Lithuania and increased competition in the banking sector.

Bank of Lithuania Governor Reinoldijus Sarkinas was delighted with the news. "This is a known German bank - Germany is a well known market and one of our main trade partners," he told The Baltic Times. "It provides a very good counterbalance to the Scandinavian capital that has come to play a big role in Lithuania's banks."

Sarkinas said he did not think negotiations with NORD/LB would be lengthy or especially difficult. "I expect everything should be wrapped up this year."

NORD/LB's Herlyn was also confident talks could finish by the end of the year. The deal could be completed in the first months of 2002, he said.

But some important issues have yet to be resolved in negotiations, he warned. "Our declaration as preferred bidder is just the first step toward a successful conclusion of the deal," he said.

Citing unofficial sources the Baltic News Service said NORD/LB had offered to pay about 70 million litas ($17.5 million) for the stake in Zemes Ukio Bankas and had made a commitment to invest twice that much over time.

That would compare to the 107 million litas reportedly offered for the same stake last year by a consortium of Italy's UniCredito Italiano and Poland's Bank Pekao, which ultimately pulled out of negotiations.

In the fall of 1998, an initial tender to privatize the bank collapsed when Latvia's Parex Bank submitted the only bid, which Lithuanian officials dismissed as risible.

Zemes Ukio Bankas' assets totaled 1.77 billion litas at the end of September. It reported an unaudited net profit of 14.8 million litas for the first nine months of this year.

With a market share of about 15 percent, the bank boasts the second most extensive branch network in Lithuania, and has made a name for itself in leasing and trading Lithuanian treasury securities.

The World Bank and the International Monetary Fund have repeatedly urged it be privatized.

NORD/LB is the 10th largest bank in Germany and the leading commercial bank in northern Germany. Since 1999 it has been strategically expanding into northeastern Europe.