Zigurds Jeromanovs, vicepresident of Latvijas Unibanka, was appointed as Krajbanka's board chairman and president after Arnolds Laksa handed in his resignation.
Laksa said he quit over a continuous conflict with shareholders from Ventspils that would have prevented the bank from normal development had he stayed in office.
"For me as a businessman, the added value of the bank is vital," he said. "And then I realized I had to go."
Uldis Cerps, chairman of the Latvian Financial and Capital Markets supervisory committee, called the Krajbanka management changes a "normal process," which in no way would affect the bank's stability.
Krajbanka, still 32 percent owned by the state, found itself in a stalemate after its two other groups of shareholders - companies and individuals from Ventspils and a foreign and local shareholders' group coordinated by the bank's ex-President Arnolds Laksa - started to fight for influence in the bank in the summer of 1999.
After the August 1998 financial crisis in Russia, when Krajbanka lost some 6 million lats ($9.37 million), the bank, which holds more than 95 percent of the privatization voucher accounts in Latvia and over 600,000 individual accounts, ran short of equity.
The state and Ventspils shareholders refused to invest in the bank, and its leaders had either to find a new strategic investor or attract subordinated capital to stay afloat.
After negotiations failed with potential bidders, among them Norwegian Norske Bank and Estonian Hansapank, the bank's management tried to get additional funds.
This was successfully done in 2000, when the Dutch company Macasyng came in, lending the bank some 2.2 million lats, hoping to become a full-fledged shareholder. However the Ventspils group, comprised of the three large transit companies Ventamonjaks, Ventbunkers, Kalija Parks, individual shareholders and Ventspils Mayor Aivars Lembergs, strongly objected.
At the end of 2001, Latvian Prime Minister Andris Berzins announced Krajbanka would be the last large state-owned company to be privatized. It services the privatization of the state property for vouchers and, he said, it would be unwise to give it away before the privatization process is over.
More for sale
Latvia hopes to sell its largest remaining state-owned companies in 2002. The Latvian state is still a shareholder in four large companies - the Latvian Shipping Company, communication company Lattelekom, oil loading company Ventspils Nafta and Krajbanka.
After the privatization process in Latvia is over, the savings bank will most likely be put up for sale, some experts have suggested. The Ventspils group shareholders were reluctant to comment on their future plans.
"The new board will have to work on the bank's development plan for the next five years," Laimonis Strujevics, the financial director of Ventamonjaks and Krajbanka's supervisory council member, said. He added, however, that when the privatization process for vouchers is over, Krajbanka would have to be ready to change its strategy and attract new clients.
"The sooner it is thought about the better," he said.
Still, attracting new clients, especially small- and medium-sized businesses, has been a priority of Krajbanka's management since 1997 when Laksa became the bank's president.
Krajbanka has been transformed from a clumsy, post-Soviet institution to a modern bank with trained employees, up-to-date IT systems, renovated premises and a renewed image.
"After the privatization, Krajbanka has worked with a profit, except in 1998, when there were losses after the Russian crisis," the bank's council chairman, Viesturs Koziols, told shareholders. "In five years, Krajbanka has become a serious competitor to other commercial banks."
So, bidders may soon line up. One potential applicant could be the German Norddeutsche Landesbank, the owner of Latvia's Pirma Banka (formerly Rigas Komercbanka), which almost sank after the Russian crisis. Norddeutsche Landesbank had already been negotiating the purchase, but in vain, as Krajbanka's shareholders failed to agree.
Now they have some hope.
"Pirma Banka is still interested to consider and analyze the potential acquisition of Krajbanka or another Latvian bank," Juergen Machalett, president of Pirma Banka, said.
All for one
There are several criteria that have to be met, the most important of which is to acquire at least 75 percent of the purchased bank's shares, he added. This means that Krajbanka's shareholders have to take a common stance this time.
"Does the election of a new president mean that they will agree now?" asked Ingrida Allika, the bank's spokeswoman.
There are 22 banks in Latvia, while Estonia has seven and Lithuania has nine. The largest three - Latvian Unibanka, a part of the Swedish SEB Group, Hansabanka, a part of the Swedbank-owned Hansabank Group, and Parex bank, which has unsuccessfully been looking for a strategic investor since 1999, control over 50 percent of the Latvian banking market.
As the Latvian banking supervision rules call for 10 percent capital adequacy for lending, local banks untied to their mother banks' funds and capital basis abroad aren't able to extend multi-million loans even to local companies.
Still, Cerps was reluctant to comment on possible consolidation of the Latvian banking market.
"Yes, there are many banks in Latvia, but that's a result of the market economy. And all of them are profitable," he stressed.
Krajbanka is the fifth largest bank in Latvia in terms of assets and its audited profit in 2001 was 1 million lats. The bank's equity is 9.6 million lats.
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