ECONOMY

Austrian buyer sees bonanza in Albania

TIRANA (Reuters) – Austria’s Raiffeisen Zentralbank said the reason it bought Albania’s leading bank, Savings Bank, was to gain a foothold in a fledgling economy poised to explode after years of political and economic crises. Raiffeisen believes there is enormous growth potential in the construction and trading sectors of the Balkan country, where loans amount to only 6 percent of GDP, compared with 111 percent in Austria. «It is a very interesting bank, a unique opportunity frankly to buy a dominant bank in a country which I think is poised to explode economically,» Jeffrey B. Millikan, managing director of Raiffeisen International Bank-Holding AG, told Reuters. Millikan masterminded the purchase of the Savings Bank, Albania’s largest, for $126 million, the highest foreign investment in ex-communist Albania’s decade of capitalism. He said Savings Bank, which had been banned from lending since 1997, would apply to the central bank for permission to restart lending and hoped to begin again, probably in October. The bank, the once-isolated country’s biggest privatization, had been offered for sale twice without success. A lukewarm international climate and political instability kept investors away from a country that suffered several crises since the collapse of communism, including a violent revolt after fraudulent pyramid schemes collapsed in 1997. But Millikan said economic fundamentals now looked sound, with GDP expected to grow 6 percent this year, inflation of between 2 and 4 percent, and the exchange rate stable. Albanian law was sound, he added. The Savings Bank had been banned from lending because «either unsound or politically motivated lending decisions» caused bad loans, which it shed before the sale. For six years, it had no other choice but to invest in government treasury bills and interbank deposits. Millikan said the bank will remain dominant in deposits and in regional coverage but will start to build market share in corporate and consumer lending. «There is over 1 billion euros of investment in government T-bills. And it’s going to take years to replace that with corporate and consumer loans, years, years and years,» he said. «I think that if in two years we have 200-300 million euros of corporate loans on the books that would be a good achievement. It really depends on how quickly the economy grows.»