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EBRD and KLUH support first privatisation in Croatia's banking sector
The ongoing privatisation process in the banking sector is vital to the transition in Croatia. To strengthen the local financial sector and to support the development of small and medium-sized enterprises (SMEs), the European Bank for Reconstruction and Development (EBRD) will purchase up to 17.5 per cent of the share capital of Slavonska Banka d.d. Osijek (SBO), one of the largest regional banks in Croatia. It will also provide a DM 20 million (ECU 10.1 million) five-year convertible loan. An Austrian bank, Kartner Landes- und Hypothekenbank (KLUH), will purchase another 17.5 per cent of SBO and will finance up to 50 per cent of the loan.
David Hexter, Deputy Vice-President at the EBRD, said: "This project makes a significant contribution to the privatisation process in Croatia as it constitutes the first privatisation of a restructured bank. The EBRD has been instrumental in attracting strategic investment from Kartner Landes- und Hypothekenbank, which will help to improve the level of sound corporate governance. The project will have a very strong demonstration effect for future privatisations. The provision of medium and long-term funding will significantly improve the business environment in a region badly affected by the recent war."
Dr Wolfgang Kulterer, General Manager of KLUH said: "Kartner Landes-und Hypothekenbank has been active in the Croatian market since 1993 and despite some difficulties, is confident about the future of the country. We already have investments in Zagreb, Istria and on the Dalmatian coast. We consider the Slavonia region to be particularly important for the future of Croatia, so we had no hesitation in investing in Slavonska Banka alongside the EBRD. For us, it is a long-term commitment and a strategic investment."
The outbreak of the serious conflict in 1991 and the occupation of the eastern Slavonia region caused a severe liquidity crisis in SBO. To solve these problems, SBO applied for "Voluntary Rehabilitation" and was admitted into the programme at the end of 1995. In January 1996, SBO received a cash injection as well as a capital increase from the State Agency for Deposit Insurance and Bank Rehabilitation (DAB), which holds 35 per cent of its capital. The main objective of the project is to achieve the privatisation and stabilisation of SBO by buying out DAB and providing SBO with a long-term facility.
SBO will use the funds to expand its medium to long-term investment programme for SMEs to enable them to start, upgrade and modernise production. SBO will also extend its working capital loans and trade finance in Croatia, especially in Slavonia and the Baranja region.
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