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| RBAV SUB-LOAN |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 28952 |
| Company name | Raiffeisen Bank Aval |
| Country | Ukraine |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Pend PDS-IR |
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| Date SPI disclosed | November 2, 2009 |
| Projected board date | December 3, 2009 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed investment in Raiffeisen Bank Aval ("Aval", or the “Bank”) consists of a subordinated loan of $105 million under the Joint IFI Action Plan for Eastern Europe, introduced in March 2009. It will help to strengthen the capital position of the Bank at a time of economic turmoil in the country.
Aval is a systemic bank which as of 01/07/2009 ranked second in Ukraine by total assets with a full range of banking services provided to all kinds of customers – from big corporate to individuals. The Bank enjoys one of the largest franchises in Ukraine with 1,069 branches present in all regions. Since August 2005, close to 96% of the Bank’s equity is owned by Raiffeisen International Bank-Holding AG ("RI"), a fully consolidated subsidiary of Raiffeisen Zentralbank Österreich AG (RZB). The remaining stock (ca. 4%) is traded at the local stock exchange. RI has been a long-standing IFC client since 1987, and Aval has benefitted from three investments in the recent past: two subordinated loans in total amount of $70 million, a senior loan of $15 million, and a GTFP line of $30 million. |
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| Project sponsor and major shareholders of project company |
The Bank’s Parent company – RI – is one of the leading banking groups in Central and Eastern Europe with 15 banks and many other financial service enterprises in 17 markets. In 6 of those countries, RI network banks were among the top 3 banks, as measured by their balance sheet totals. As of 30 June 2009, RI had close to 60,000 employees serving around 15 million customers at almost 3,200 business outlets.
RZB owns about 70% of RI common stock; the balance is free-float, listed on the Vienna Stock Exchange.
RZB is the third-largest bank in Austria and one of the country's leading commercial and investment banks. It was founded in 1927 and is the central institution of the Raiffeisen Banking Group, which is Austria's largest banking group. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost is estimated at $105 million subordinated loan (type C). |
| Location of project and description of site |
| The Bank is headquartered in the capital of Ukraine, Kyiv. It operates 1,069 outlets located in big cities, provincial and community centers and villages across Ukraine. |
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| Anticipated development impact of the project |
The proposed project is expected to have the following development impacts:
Support the systemically important bank by strengthening its equity base;
Demonstrate IFC’s crisis response to the Ukrainian banking sector and, thus, helping to regain the public’s trust;
Catalyze the recovery of the real economy by increasing lending by the leading bank. |
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| IFC's expected development contribution |
| IFC has played an active and important role in this proposed investment through its involvement in the overall Joint IFI Action Plan, and more specifically in aligning the investment in Aval within the framework of the Action Plan. As the Ukrainian economy emerges from the financial crisis, Aval will be financially stronger and in a more competitive position to grow and resume lending to some of the hardest hit sectors of the economy. |
| Environmental and social issues - Category FI |
The proposed project has been classified category FI according to IFC’s Environmental and Social Review Procedure. Raiffeisen Bank Aval is an existing IFC client. Raiffeisen Bank Aval is following RI Group Corporate Credit Policy to conduct its lending operations. Though, RI Corporate Credit Policy does not specifically address issues of environmental and social compliance and monitoring, it stipulates that every regional network bank shall introduce its own Credit Policy for Corporate lending in the country.
IFC's appraisal will focus on the client's portfolio risk and existing capacity to manage E&S risks. In addition, due diligence will be carried out on the Bank's HR policies and practices to determine compliance with IFC's Performance Standard 2: Labor and Working Conditions requirements, and if needed to provide recommendations to address any gaps. Final applicable requirements will be determined once IFC reviews the client's portfolio, labor standards and existing E&S capacity.
Under the terms of the proposed investment, the client will be required to develop a Social and Environmental Management System (SEMS) as a condition of commitment, maintain staff responsible for SEMS implementation, and submit Annual Environmental Performance Reports (AEPRs) to IFC. |
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| For inquiries about the project, contact: |
Ms. Victoria Masna
Director, Financial Institutions Division
Raiffeisen Bank Aval
9, Leskova St.
Kyiv, 01011, Ukraine
Telephone Number +38-044-230-23-44
Fax Number +38-044-230-23-44
Website: www.aval.ua |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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