ECONOMY

Delays help Romania’s CEC shape up for sale

BUCHAREST (Reuters) – Privatization delays have helped Romania’s oldest bank CEC get into shape for a sale which offers the last chance for investors to win a major bank in fast-growing emerging Europe, its chief said. Romania has been postponing the sale of 69.9 percent stake in Casa de Economii si Consemnatiuni (CEC) for months to get a higher price for its fifth-largest bank, which had been losing market share since communism fell in 1989 until late 2005. CEC Chairman and Chief Executive Eugen Radulescu told Reuters the bank’s management used the delays to turn the former people’s bank into a more modern institution able to better challenge its rivals. «The delay helped us to better prepare the bank for sale,» Radulescu said. «I hope that a fair evaluation will realize that the bank did change quite rapidly over the past year.» The government expects the sale to value the 142-year-old bank, which has a book value of 250 million euros ($314.5 million), at 1 billion euros, while analysts estimate it may fetch around $650 million. Media had speculated that bidders were not eager to pay more than 300 million euros for the government’s stake, but Radulescu said the price may be boosted because it gives a unique chance for Western banks to establish a presence in Romania’s booming market. «The most important issue for the valuation of the bank is the scarcity of supply,» said Radulescu. «There are many potential buyers but only one relatively big bank for sale in Romania.» Last year, seven European Union-based banks filed non-binding bids for CEC: Franco-Belgian Dexia, National Bank of Greece and Greek rival EFG Eurobank, Austria’s Erste Bank and Raiffeisen, Hungary’s OTP and Italy’s BMPS. In May, the state said it still planned to sell CEC this year, with a new bid deadline to be set in two to three months. Radulescu said CEC’s strongest asset for a new owner was its network of 1,400 branches covering also under-banked rural areas, where billions of euros from the European Union funds may flow after Romania’s entry in 2007 or 2008. «There is a huge potential. We have more units than all other banks in Romania combined,» he said. «Growing the market share to probably 10 percent in terms of assets is within reach in the next three to five years.» CEC controlled a third of the market in terms of assets and 99 percent of individual deposits in 1990, compared with the current 4.5 percent and 25 percent respectively, he said. Radulescu said the most dramatic changes in CEC over the past year were overhauling its outdated structure and launching new products including banking cards. CEC also axed around 2,000 jobs over the past year, cutting the total to 7,400. CEC, which is popular among the poorest Romanian pensioners and farmers, had a net profit of 12.7 million lei in the first quarter, compared with a 4.1 million loss a year before.