VSEOBECNA UVEROVA BANKA PRE-PRIVATISATION (DEBT & EQUITY)

Location:

Slovak Republic

Project number:

14807

Business sector:

Financial institutions

Notice type:

Private

Environmental category:

FI

Target board date:

14 Nov 2000

Status:

Completed

PSD disclosed:

09 Feb 2001

Project Description

The EBRD and the IFC have acquired up to 25 per cent of the ordinary shares and voting rights of Vseobecna Uverova Banka (VUB) during the pre-privatisation process of this Slovak bank. This transaction is expected to facilitate the implementation of VUB’s restructuring and subsequent sale to a strategic investor. Additionally, the EBRD will provide a EUR 20 million SME credit line to VUB, in order to support its lending operations in a sector not yet adequately served in the country and to improve its expertise in this kind of financing.
Project objectives:
In 1999, the Slovak government initiated a series of restructuring measures in the banking sector, which included the carve-out of classified loans from the three largest state-owned banks and the recapitalisation of these banks.
 
Following the restructuring, the Slovak government has already sold its majority stake in SLSP to Erste Bank and it plans to achieve the full privatisation of VUB by the end of 2001. It is expected that the EBRD’s and IFC’s participation in VUB’s capital will facilitate the implementation of the bank’s restructuring and subsequent sale of the government’s remaining stake to a strategic investor.
 
Additionally, the EBRD will provide VUB with a SME credit line under the EU/EBRD SME Finance Facility to develop VUB’s lending operations in a sector not yet adequately served in the country and improve its expertise in this kind of financing.
 
 

Transition Impact

A considerable percentage of the Slovak banking assets is still in the government’s hands and this has significantly impaired the sector’s growth potential and development. The chronic problems of directed lending and consequently financial backing of poorly run companies has resulted in a level of non-performing loans that is among the highest in Europe.
 
The privatisation of VUB is part of the broader government’s restructuring and privatisation plans for the country’s banking sector, partly motivated by the financial sector adjustment loan currently under negotiation with the World Bank.
 
In the above context, the transition impact potential of this project comes from its support of the restructuring and privatisation of VUB. The pre-privatisation investment by the EBRD and the proposed SME credit line aim to promote VUB’s restructuring in the run-up to privatisation and to raise the confidence of potential strategic investors. The project is expected to have strong demonstration effects. In addition, the EBRD’s role in the corporate governance of VUB is expected to contribute to improving the transparency of accounts and processes, setting standards of business conduct, and safeguarding the bank from possible government interference.

The Client

VUB is the second-largest bank in the Slovak Republic, with total assets of US$ 3.5 billion and equity of US$ 256 million at the end of 1999. VUB accounts for almost 20 per cent of the Slovak banking sector assets. At the end of June 2000, the bank had 41 branches, 198 sub-branches and 6,100 employees. VUB is the leading corporate bank in the country, with 26 per cent and 20 per cent market share in loans and deposits respectively. Although Slovenska Sporitelna (SLSP) remains the clear leader in retail, VUB has developed a strong retail banking franchise and commands a 21 per cent market share of retail deposits.

EBRD Finance

  • The EBRD and IFC have acquired 12.5 per cent each of VUB capital and voting rights.
  • EUR20 million SME credit line under the EU/EBRD SME Finance Facility.

Project Cost

The Slovak government invited the EBRD and IFC to submit an offer for the purchase of up to 25 per cent of VUB’s shares and voting rights as a pre-privatisation investment.

Environmental Impact

VUB will develop an Environmental Policy with the help of the EBRD based on the EBRD’s "Environmental Procedures for Intermediated Lending through Local Banks", which will allow bank staff to identify, mitigate and monitor environmental risks associated with VUB’s operations. In implementing its Environmental Policy, VUB will require its clients to comply, at a minimum, with national/local health, safety, environmental and public consultation requirements.

Technical Cooperation

TC funds will be arranged to provide the bank with credit and risk management advisors. TC will be also provided to support the SME credit line. The funding of this component is already included in the EU/EBRD SME Finance Facility.

Company Contact

 
 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.