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Summary of Project Information (SPI) |
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| Project number | 9380 |
| Project name | Vilniaus Bankas SMSE/Mortgage Loan Credit Line |
| Country | Lithuania |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | Vilniaus Bankas AB |
| Environmental category | FI |
| Date disclosed | February 18, 1999 |
| Status | Completed |
| Previous Events | Signed: June 30, 1999
Approved: May 28, 1999 |
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Summary Of Project Information (SPI)
| Project Name: | Lithuania: Vilniaus Bankas |
Region:Central and Southern Europe
Sector:
Project No:009380
Projected Board Date:March 18, 1999
Company Name:Vilniaus Bankas
Technical Partner and/or Major Shareholders
The strategic partner in this project would be Skandinaviska Enskilda Banken (SEB), one of the largest banks in Scandinavia. It is one of the most dynamic Nordic institutions in both banking and asset management, and has recently expanded its operations in the Baltic countries. In December 1998, SEB acquired a 32% stake in Vilniaus Bank.
Project Cost Including proposed IFC investment
The Project involves the provision of long-term funding of up to US$20 million equivalent to Vilniaus Bankas AB (VB) in Lithuania. Of this, US$15 million would be used to provide term finance to the Bank’s corporate clients, including small and medium sized enterprises (SME). The remaining portion of the loan (US$5 million) would be used to provide affordable, residential mortgage loans to individual Lithuanian homebuyers.
Location of project and Description of site
Lithuania's economic boom was brought to an end by the Russian crisis in the second half of 1998. The collapse in Russian demand has hit the Lithuania exports sector. Redirecting exports to the West will be difficult in the short run, with EU growth forecast at only 2% in 1999. Domestic demand may also slow down as monetary conditions remain tight. Real GDP growth at around 3% will be sharply lower than in previous years. Lithuania has a currency board system whereby the Lithuanian litas is pegged to the US dollar, which has provided macro-economic stability.
The lack of long-term funding is probably the most difficult issue for project and mortgage finance in Lithuania. There is no long-term bond market and there are few long-term deposits. The Insurance companies and other potential long-term investors are small and have very little lending or investment capacity.
Description of Company and Purpose of Project
Since the Lithuanian banking crisis, which peaked in 1995, VB has emerged as the country’s largest and most profitable private bank. By December 1998, VB’s total assets reached US$680 million equivalent and its equity increased to US$107 million equivalent. As of the same date, VB’s return on average equity and assets was 25.7% and 2.7%, respectively.
The relatively recent banking crisis and overall emerging market turmoil has affected the liquidity of the Lithuanian banking sector. Little term funding is available to Lithuanian banks. This project would enable IFC to channel funds to SMEs for longer maturities than they could otherwise access. The project would have the dual objective of: a) easing the medium-term funding constraint of small- and medium-size private sector enterprises; and b) meeting the growing demand for housing finance.
Environmental Category and Issues
This is a Financial Intermediary (FI) Type 2 project according to IFC's environmental review procedure. VB will be required to undertake an environmental review of each subproject to ensure compliance with host country requirements, IFC environmental and social safeguard policies, and, if applicable, World Bank Group environmental, health and safety guidelines. IFC will assess VB's capability to carry out environmental reviews. VB must obtain IFC clearance prior to making any investment with IFC funds in any Category A project.
| Date SPI sent to InfoShop | February 18, 1999 |
“This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporation’s Board of Directors. It is provided for the purpose of enhancing the transparency of IFC’s activities and should not be construed as presuming the outcome of IFC Board consideration.”
For Additional Information contact: Corporate Relations Unit -
telephone: (202) 473-7711
facsimile: (202) 974-4384 |
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