By Antonia Oprita - Reuters

BUCHAREST - Major international banks are eying the privatization of Romania’s biggest bank, Banca Comerciala Romana (BCR), due to become a key player in a future European Union member.

EU membership may be some years away, but investors are also banking on growth in a country with a population of over 21 million, where only one in three adults has a bank account.

“Western banks look at Eastern European countries as big potential markets. Romania has some important investors and important money coming in,” Carlin Doyle, an analyst with Oxford Economic Forecasting, told Reuters.

Under a plan agreed with international lenders, by the end of the year, Romania will have sold 51.88 percent in BCR to a strategic investor. Analysts say the winning bidder may have to pay around a billion dollars for the stake.

The BCR selloff will leave just 10 percent of the banking system in state hands.

Doyle said banks interested in BCR, whose 127.6-trillion-lei ($3.89 billion) assets make up one-third of Romania’s banking assets, want to lead in a future EU economy where high inflation now helps keep interest rates between 25 and 37 percent.

Analysts say western banks are looking east for the higher profit margins associated with bigger risk and weaker competition, because the consolidation of the banking sector in western countries is almost over.

Smaller Romanian banks might become attractive for those that miss out on BCR but still want a share in an underdeveloped retail banking sector in eastern Europe’s second most populous country, they said. ING Bank from the Netherlands, Germany’s Hypovereinsbank (HVB) and France’s state-owned Eulia, a holding set up by savings bank Caisse d’Epargne and bank Caisse des Depots et Consignations, have confirmed their interest in BCR as part of an expansion strategy in eastern Europe.

The Romanian privatization agency said five international banks have said they want to bid for BCR so far in the biggest bank selloff in eastern Europe this year.

But apart from ING Bank, which operates the country’s third largest bank, they would have to compete for a market share with other big foreign banks.

France’s Societe Generale, the main shareholder in second largest bank BRD, Greece’s EFG Eurobank and Banco Portugues de Investimento, which owns the fifth largest bank Banc Post, are all seeking more growth.

Other important players are Dutch ABN Amro, with a market share of 16.5 percent and Austria’s Raiffeisen with a 10.7-percent market share.

A recent study by HVB forecast lending will increase by 12 percent annually in central and eastern Europe between 2002 and 2005. In Romania, loans will represent over 40 percent of gross domestic product in 2005 from less than 35 percent now.

“The other banks would have a last opportunity to consolidate their positions,” a Bucharest-based banking analyst who declined to be named said. “Players unhappy to be outsiders would try to buy other banks.”

But the choice, analysts say, is limited to two private medium-sized banks with enough muscle to show growth potential.

The largest, Banca Ion Tiriac, was created by former tennis player turned businessman Ion Tiriac and has a market share of over 3 percent. Its owner told local media the bank needed “a strong partner” but did not say if he was prepared to sell.

The other target could be successful medium-sized Banca Transilvania, which recently reported a 25-percent rise in assets to 6.6 trillion lei ($201.3 million) from the end of last year.

Analysts said banks from Italy and Germany, Romania’s main trading partners, might try to firm their positions in the country, where they now operate only small units.

But the success of Romania’s banking will depend on overall economic growth and investors are betting on government promises of GDP rises between 4 and 5 percent for the coming years.

Analysts said Romania’s relationship with international lenders will play a major part in attracting much-needed foreign direct investment to generate sustainable growth.

The presence of the European Bank for Reconstruction and Development (EBRD) in various projects in the country, notably in banking, where it owns minority stakes in four banks, was seen as a seal of approval.

However, they warned that Romania’s rocky relationship with the International Monetary Fund (IMF), which has blocked loans due to the government’s reluctance to make unpopular reforms, might discourage foreign investors.

“Keeping a good relationship with the IMF will be very important, especially now when the European economies are not doing very good,” Doyle said.