Final bids due for last state-owned Czech bank
Final, binding bids are due in from foreign investors this Friday for the last of the Czech Republic's large banks still majority owned by the state, Komercni Banka. The bank has been plagued by scandal over the past few years, as poor loans and alleged corruption threatened to drag it under. As a result, the Czech government has had to fork out tens of billions of Czech crowns to keep Komercni Banka afloat. So who's interested in buying the bank, and will the Czech government recoup its losses? Nick Carey has been trying to find out.
The Social Democrat government has been talking about privatising the state's sixty percent stake in Komercni Banka ever since it came to power in 1998. But, this has proven much harder than expected.
The problem is that during the 1990s, Komercni Banka issued billions of Czech crowns in bad loans. The government has paid out vast sums to cover these loans, and the final bill could cost Czech taxpayers up to ninety billion Czech crowns, or almost 2.6 billion US dollars. Also former top managers at Komercni Banka have been linked to a corrupt loan scandal, in which eight billion Czech crowns was lent to an Austrian company under suspicious circumstances.
But, there are apparently four major banks interested in buying Komercni Banka, including Germany's HypoVereinsbank and France's Societe Generale. According to analyst Ondrej Datka of Patria Finance, this is because the bank has been cleaned up and is now an attractive prospect for foreign investors:
"Historically, Komercni Banka has had a huge problem with bad debt and with skeletons in its closet. I think now we are at a different stage, because after a series of bailouts and capital increases, the bank is now strong enough to keep cleaning up its portfolio. On top of that there is a government guarantee of up to twenty billion Czech crowns, so I think the larger part of the bad debt problem has been dealt with."
A year ago, Komercni Banka was in complete disarray, after its management were sacked and then charged in connection with the Austrian loan scandal. But since then, many analysts are convinced the new management has turned the bank around:
"I don't expect any major skeletons to be found. You should remember that Komercni Banka's management has been changed several times ove rthe past few years, and I think the new management is different. They are true professionals and I don't expect the mistakes of the past to be repeated."
The sale of Komercni Banka could bring the state anywhere between 25 billion and 45 billion Czech crowns, far short of the estimated 90 billion needed to save the bank. Despite widespread public anger at the size of the bill, analyst Ondrej Datka believes the cost would have been far greater had the government not taken action:
"I thin the government was in the position where not paying money to Komercni Banka would have carried a greater cost for the government. When you add up cost of the bailouts, I think it's going to be greater than the amount the government will get for the bank this year, but I think there was no other option."