ECONOMY

Serbia’s top bank to present a restructuring plan ahead of sale

BELGRADE – Serbia’s biggest commercial bank, Vojvodjanska Banka, announced yesterday it would soon submit to the government for approval a restructuring program aimed at improving its performance ahead of a possible sale. Serbia has missed an end-September deadline, imposed by the International Monetary Fund, to draft a plan for the troubled bank in which it holds a 98.0 percent stake. «We are going to present to the State a program aimed at boosting our capital base, improving our liquidity, cleaning the credit portfolio of bad loans and introducing efficient risk management,» Vojvodjanska Deputy General Manager Perisa Ivanovic told Reuters. Vojvodjanska, with a 15 percent market share, is among 16 banks nationalized in 2002, when the central bank decided to swap their debts to foreign lenders into state-held equity. The resolution of Vojvodjanska’s troubles is key for Serbia to qualify for a second, $40 million tranche of World Bank assistance for private and financial sector structural reforms. Western analysts say the bank will be offered for sale in 2004, although the State could also consider closure or a merger with one of 40 local banks. Serbia had originally wanted to keep Vojvodjanska out of foreign hands. Until June this year, Vojvodjanska had 12.99 billion Yugoslav dinars ($224.4 million) in accumulated losses. But it wrote off much of the loss in June with a 98.02 percent cut in nominal share capital, which was 14.37 billion dinars at the end of 2002, Ivanovic said. He said the bank hoped to show some profit for 2003. Compensation «Shareholders will be compensated for part of the lost capital this year and fully make up for it by the end of 2004,» he said. But Vojvodjanska, which escaped closure in 2002 when Serbia shut four big, loss-burdened banks, still has to cross the hurdle at the end of 2003 of new debt settlement agreements with foreign creditors. «We must wait for the end of the year to see if a new, stricter audit results in fresh provisions against losses because of new creditor claims,» he said. A foreign analyst said a sale would be less costly than closure, although the State would not benefit because «the sell-off proceeds must be used to repay some of the debt incurred by the bank.» «Vojvodjanska’s fate is to be decided in the months ahead by offering the bank for sale… but the current political situation is affecting the ability of the government to decide quickly,» the analyst, who asked not to be named, told Reuters. Analysts said the approach of Serbia’s presidential election in November was discouraging clear decisions on the issue. Some said the ruling DOS bloc was aiming in the polls to stave off pressure for a general election that could test its 126-seat majority in the 250-seat Parliament. Some local bankers said Vojvodjanska could face difficulties if Novosadska Banka and Continental Banka, both from Serbia’s northern province of Vojvodina, are privatized before it is, as the two banks might take clients and staff from Vojvodjanska. Novosadska has named Italy’s Unicredito as a likely partner, while analysts say Continental is likely to be acquired by Slovenia’s Nova Ljubljanska Banka which already has a stake.