Government announces sale of last state-owned bank

The Czech government finally brought an end to months of media and financial market speculation on Thursday morning, when it announced the results of the public tender to purchase the state's majority stake in Komercni Banka, the last large Czech bank not yet in private hands. The lucky winner: France's Societe Generale, the price: just over one billion US dollars. Analysts have welcomed the news, but the opposition parties are up in arms, saying the government has lost vast sums of money on the deal. Nick Carey has this report...

Komercni Banka

When the Social Democrats came to power in the summer of 1998, one of their main promises was that they would privatise the remaining three large Czech banks, CSOB, Ceska Sporitelna and Komercni Banka within two years. CSOB was privatised fairly smoothly, but both Ceska Sporitelna and Komercni Banka presented a major problem - they had accumulated tens of billions of Czech crowns in bad debts, which the government was forced to buy up before being able to proceed. After privatising Ceska Sporitelna at great cost, the government turned to Komercni Banka and, after a year's delay, announced the result of the tender on Thursday. The winner of the tender, France Societe General beat the bids of Italy's UniCredito and Germany's Hypovereinsbank and will take over Komercni Banka within two months. Economic analysts like Andrea Ferancova of Wood and Company have welcomed the move, as they say the bank will be able to function better in private hands:

"It's definitely a very good and a very positive move that they sold the bank to a strategic investor, because the government will never manage the bank as well as a private owner."

Although analysts at home and abroad have responded favourably to the deal, the Czech opposition parties have strongly criticised the government, saying that the forty billion Czech crowns obtained from the sale of Komercni Banka is far short of the vast sums paid out to buy up the bank's bad debts. But according to analyst Andrea Ferancova, the government had no choice but to buy up the debts, otherwise no-one would have wanted to buy Komercni Banka:

"What happened with Komercni Banka took place in the past, so the government didn't have much choice. They had to take the bad loans out of the bank, otherwise no-one would have bought it. So it's very difficult to say whether it was a loss-making move or not, because like I said, they didn't have much choice, and in the end they got a good price for it."

Opposition MPs have also criticised the criteria for the public tender, in particular the government's insistence that the bank would go to the highest bidder. Andrea Ferancova agrees that this was not the most ideal form for sale, but that the risk involved is minimal, given the solid reputation of the contenders:

"Well, of course this is not the best of criteria, but UniCredito and Societe Generale are quite good banks, as is Hypovereinsbank. I don't think in this case that price is such a bad criterion. If it had been someone really unreliable, then it would have been unwise, but with these three banks it was not such a bad idea."