|
|  |
| Contibankaequity |
|
| 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 | 24700 |
| Company name | Continental Banka A.D. |
| Country | Serbia and Montenegro |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Active |
|
| Date SPI disclosed | May 5, 2006 |
| Projected board date | June 5, 2006 |
| Previous Events | Invested: August 8, 2006
Signed: June 14, 2006
Approved: June 12, 2006 |
|
| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| The project consists of up to €20 million ten-year senior loan to NLB Continental Banka and possibly an equity investment representing a 10% stake (about €5 million) in NLB Continental Banka a.d. (the bank). The equity investment is subject to the approval of NLB’s Supervisory board. The purpose of IFC project is to assist the bank in expanding its retail and consumer lending, in addition to enabling it to extend term financing for SMEs and mortgages, particularly within Novi Sad in the Vojvodina region, the second largest economic center in Serbia & Montenegro. The bank is the fifth largest commercial bank in Vojvodina (16th in Serbia, measured by total assets), serving over 150,000 customers, in retail and to corporate customers. The bank has traditionally focused on corporates and industries involved in foreign trade, whilst its new strategy emphasizes retail banking, mainly in the Vojvodina region. The relationship between IFC and the bank started in 2004 when the bank took over three old IFC’s senior loans from 1980’s following the debt restructuring of the State of Serbia. After the restructuring of Serbia’s Paris and London Clubs’ loans, the State became the majority shareholder of the bank with a 98.5% stake. It was offered for sale in a privatization tender in early 2005, and the purchase was made by Nova Ljubljanska Banka (NLB d.d., Slovenia) in July 2005. |
|
| Project sponsor and major shareholders of project company |
| NLB Continental Banka is the fifth largest commercial bank in Vojvodina (16th in Serbia, measured by total assets), serving over 150,000 customers. It was established in 1991, with the majority shareholder being Jugobanka a.d. (with 51% of the share capital). Other large shareholders were state-owned enterprises. After its privatization last year, it is owned by the NLB Group (Nova Ljubljanska Banka) which is the largest banking and financial services group in Slovenia with total assets accounting for more than one third of the total assets of the Slovenian banking sector. The group has over 1.5 million customers, a consolidated asset base of €11 billion, and shareholders’ equity of €72 million. |
| Total project cost and amount and nature of IFC's investment |
| The total project size is estimated at around €25 million, composed of a small equity (10% stake) and a long term loan. |
| Location of project and description of site |
| Headquartered in Novi Sad, the bank is mainly servicing Vojvodina region, the second strongest economic area of Serbia & Montenegro after Belgrade, in addition to its strong presence in the capital city of Belgrade. The bank has a modest market share of 1.7% of total banking assets as at the end of 2005, however, it aims to grow and capture a sizeable share of around 7% over the next four years. The bank is adding six new branches and ten ATMs in 2006, resulting in a total number of 24 ATMs and over 80 branches and agencies. |
|
| Anticipated development impact of the project |
| As the government pursues its privatization policies in the industrial sector, the number of private sector companies, and SMEs in particular, is expected to grow. The demand for SME finance is expected to be especially high in the Vojvodina region, a strong industrial and agricultural mainstay of Serbia & Montenegro. NLB Continental Banka, a well known financial institution in this region, supported by NLB, a strong parent known in the area, is well poised to expand its retail and SME business, which is reflected in the bank’s need to obtain term funding. |
 |
| IFC's expected development contribution |
| IFC’s investment will help the bank to diversify funding sources and extend their term, thus enabling NLB Continental Banka to increase its lending to Small and Medium Enterprises, a specific target area of the bank; and to increase its retail and consumer lending, particularly term financing such as residential mortgages. Serbia’s financial markets were significantly affected by the turbulence of war and sanctions in the 90s, and the need for strong and competitive financial institutions continues, notwithstanding the increased entry of Western European banks in the country. |
| Environmental and social issues - Category FI |
| This is an FI Type 1 project. Continental Banka would establish an environmental management system to ensure that investments under relevant operations meet host country environmental, health, and safety requirements and are consistent with IFC’s exclusion list. |
|
|
|
|