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| Summary of Project Information (SPI) |
| This Summary of Project Information 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. |
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| Project number | 22138 |
| Project name | Transilvaniabank |
| Country | Romania |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | Banca Transilvania S.A. |
| Environmental category | C |
| Date SPI disclosed | March 24, 2004 |
| Projected board date | April 29, 2004 |
| Date revised SPI disclosed | March 24, 2004 |
| Status | Active |
| Previous Events | Invested: September 2, 2004
Signed: June 8, 2004
Approved: May 20, 2004 |
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| Description of company and purpose of project |
The project consists of up to $34 million in loans to Banca Transilvania (BT, the company or the bank), a regional bank headquartered in Cluj, Romania. Through this financing IFC will assist the bank in expanding its mortgage lending operations and reaching its growth objectives by using the best practice underwriting policies and procedures. The project will also encourage competition among the local banks engaged in mortgage lending and increase clients’ access to longer term financing, making the home ownership more affordable.
Housing finance is a relatively new, but a fast growing banking sector in Romania, whose potential is limited by the availability of long term bank funding. Over the last decade, low quality of the existing housing stock, general housing deficit, and low housing affordability translated into a high demand for mortgage products. With the recent appearance of longer tenor financing, this pent-up demand led to a steep increase in mortgage lending in Romania. Starting from a low $100 million sector wide mortgage portfolio in the end 2002 it is expected to surpass $1 billion by 2005.
The bank started extended housing loans in 2002 and continued with mortgage loans in 2003. BT has been an active participant in the mortgage lending, holding about 12% market share and having about half of its mortgage portfolio in the Transilvania region. The bank’s objective is to double the size of its mortgage portfolio by the end of 2004 and to this end BT requires more term funds. With the term of up to 10 years, the IFC’s financing package would allow Banca Transilvania to increase the tenors of its mortgage offering for up to 15 years. |
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| Project sponsor and major shareholders of project company |
| The project sponsor is Banca Transilvania, a medium-sized and well-capitalized regional Romanian bank. The bank was established in 1993 by a group of local entrepreneurs. BT belongs to a financial group, which also includes insurance (life and non life), leasing, brokerage and consumer finance companies. The bank is listed on the Bucharest Stock Exchange with a market capitalization of about $200 million and among its principal shareholders has EBRD (15%), two local investment funds (5% each), and Mr. Ciorcila, one of the founders (5%). |
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| Total project cost and proposed IFC investment |
| The total project cost is estimated at $34 million and consists of loans for IFC’s own account. |
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| Location of project and description of site |
| Banca Transilvania is headquartered in Cluj, Romania and has over 70 branches throughout the entire country. Its traditional area of geographic focus was Transilvania, a North-Western part of Romania bordering on Hungary and Ukraine. Over the years the bank has expanded into Eastern and Southern parts of Romania as well. |
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| Project Development Impact and IFC's Role |
The housing finance market in Romania is still in its infancy though the demand for mortgage products is very strong. An important developmental impact of this project is to provide critically needed long-term funding to support the extension of long term mortgage loans to families that wish to purchase or renovate their homes. The tenor of IFC’s loan would enable BT to provide long-term, and thus, more affordable mortgages. With increased affordability, more individuals could access funding to purchase new or renovate existing homes. Furthermore, through linkage effects, the development of the housing industry stimulates the supply of labor and materials for the construction and improvement of homes, a significant contributor to economic growth in Romania.
IFC will play a major role in ensuring that the bank’s mortgage products are structured using the best practice underwriting and mortgage servicing standards, including the transparency of mortgage information disclosure to the bank’s borrowers. Through its long term financing IFC will assist in diversifying the funding base and extending the funding tenor of a dynamic regional bank, which is active in the underrepresented regional housing segment of the Romanian banking sector. Finally, IFC’s participation in the project will help expand the nascent housing finance market in Romania, as well as encourage the competition and the use of best practices among the local players. |
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| Environmental and social issues - Category C |
This is a Category C project according to IFC’s environmental review procedure. The bank will be required to adhere to IFC’s exclusion list. No further environmental review is required.
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| To contact the project company, please write to: |
Mihaela Nadasan, International Relations Director
8, G Baritiu St.
400027 Cluj-Napoca, Romania
Telephone: +40 264 40 7150
Fax: + 40 264 40 7179 |
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