For Komercbanka, it's the home stretch

RIGA - Rigas Komercbanka will re-open in mid-October and should have
a strategic investor by year's end, bank President Hakan Kallaker
told journalists Sept. 24.

Negotiations have already started with three North European banks;
Kallaker would not identify potential investors but said banks likely
to be interested in the Baltic states are those from Scandinavia or
northern Germany.

Meanwhile, Komercbanka will bounce back from an eight-month hiatus
sometime between Oct. 10 and Oct. 15 with a new name and logo and new
services.

"When we say we're re-opening the bank, we are really saying we'll
establish a new bank for Latvia," Kallaker said. "This is not just a
re-opening, and that's an important part of our thinking."

Komercbanka was declared insolvent in March, when it was revealed
that it had 27 percent of its assets tied up in Russian T-bills when
they became worthless.

But since then, the Bank of Latvia and the European Bank for
Reconstruction and Development, Komercbanka's two largest creditors,
were convinced to convert their debt into shares.

Subsequently, the Latvian government and two banking syndicates
comprised mostly of German banks have come on board as well, putting
the Komercbanka's total capital at 6.3 million lats ($10.86 million).

The central bank announced it will eventually sell its shares in an
auction, but Latvian law requires new shareholders to wait six months
before transferring their holdings. By that time, Kallaker says the
bank will have inked a deal with a strategic investor. The Bank of
Latvia invested some 15.5 million lats into Komercbanka and owns
roughly 40 percent of the bank's capital.

Ilmars Rimsevics, vice president of the central bank, said the
rehabilitation of Komercbanka does not mean the central bank will
rush to bail out any troubled bank.

But he called Komercbanka "a good bank that's had its difficult days"
and said its history of good service justifies its rehabilitation.

Kallaker said, "I have a very strong commitment to this bank and I
will fight for it to come through. I'm convinced it's possible."

His first challenge will likely be convincing the 50,000 or so
private depositors and 8,000 companies and firms which had their
futures frozen in March, when Komercbanka closed its doors after
losing its shirt on the Russian T-bill market. Most public opinion
polls show roughly 75 percent of Latvians do not trust the banking
system.

"More than 50 percent of the shareholders behind us are EBRD or
government. They won't leave us," said Kallaker. "And having a
foreign strategic shareholder in a short period of time [will help]."

Rimsevics added, "It's difficult to change public perception, but if
you look at the deposit data, the banking system here is coming back.
It was hurt by the Russian crisis, but it's coming back."

The bank is liquid enough to repay those depositors who want to take
their money out, Kallaker said. However, those who want out will have
to pay a 50 percent service charge for the first two months. That fee
will be reduced gradually over the next eight months as the bank gets
stronger.

Depositors who take part in the rehabilitation plan will surrender
half of their deposits for bank shares but will be entitled to low
interest loans and lower service charges.

Depositors will be allowed to withdraw immediately up to 1,000 lats
without paying a penalty. A hotline (800 8005) dispensing information
for depositors began operating Sept. 27.