Protuguese or Austrian?

BCP Millenium and Erste Bank have entered the final for the privatization of BCR (the Romanian Commercial Bank). Deutsche Bank, the favorite of many analysts, is out. Now, the finalists have to negotiate and improve their offers.

BCP and Erste Bank have entered the final. They have to improve their offers. Who will offer more and who is more interested?

From the point of view of the assets, Erste is somewhat two times bigger than BCP, Banco Comercial Portugues - Portugal held, at the end of March this year, assets with a total value of 71.8 billion euros. Erste Bank de Oesterreichischen Sparkasen, Austria, had, on the 31st of March 2005, total assets of approximately 148 billion euros.

From the profitability point of view, the situation is equally balanced. In the first half of the year, BCP reached a profit of 302.9 million euros (363.2 million US dollars), 21% more than the profit in the same period of last year. Erste increased its flat profit for the first six months by 41%, to 335.7 million euros, in comparison to the same period of last year.

Besides Portugal, BCP also has subsidiaries in New York, Macau, the Cayman Islands and Luanda. Erste, on the other hand, has a regional structure with subsidiaries in Croatia, the Czech Republic, Hungary, Slovakia and Slovenia.

THE KEY-STEP

The negotiations are to take place next week. After that, AVAS (the National Agency for the Capitalization of the State Assets) will make the final contract and show it to the clients in its final form. The price isn’t a decisive criterion in this moment. The contract might have clauses in the benefit or one of the other sides. "After the negotiations take place, with at least 8 days before the announced date for the submission of the improved offers, the selected bidders will be shown the final contract for the selling of the shares. If necessary, the contract will also contain the final project of other contractual documents needed for the closing up of the transaction and the bidders will be invited to submit their improved offers", the Decision 760/2005 for the approval of the privatization strategy says.

COMMENTS

This is the last day in which the bidders can submit their offers for the CEC takeover. Erste Bank takes part in this privatization as well. It has to submit the final engaging offer, as well as the participation pledge. Is there a possibility for Erste to win both auctions and have where to choose from? "We are still interested in CEC and we will go on", Michael Mauritz, the spokesperson of the Austrian bank, stated for us yesterday. Erste Bank sees BCR as the perfect opportunity (an important player in the market with an important portfolio for the retail and small and medium enterprises segment). Initially, the Erste officials had announced that CEC was their priority in Romania, and, afterwards, they had been impartial. The BCP Millennium executive president, Teixera Pinto, was stating that BCR is of strategic interest and Millennium would like to obtain total control over the greatest Romanian bank. "We want to gain control over the bank. Millenium will not involve into an operation in which it cannot have a dominant position", Pinto said.

INCREASE IN THE INTEREST

The competition in the banking system will be greater in the following years, not just because of the fact that BCR and CEC will be more competitive after the privatization, but because of the fact that the BCR privatization has attracted the foreign investors’ attention towards the Romanian banking market. Erste Bank will enter the Romanian market next year, no matter the result of the BCR and CEC privatizations. However, they are convinced that they would win at least one of the auctions as Michael Mauritz, the communication director of the bank, stated. "We are sure we will take over one bank. Otherwise, next year, we will enter the Romanian market with an investment starting from zero. I can tell you that I am 100% sure that Erste will be present in Romania", Mauritz said. Deutsche Bank adopted a similar position. Even if they don’t win the BCR auction, the German bankers are sure that they will enter the Romanian market.

THE STOCK EXCHANGE

The BCP shares decreased yesterday by 6.79% after the announcement regarding an alleged increase in the capital, based on the fact that the greatest Portuguese bank might win the privatization auction for BCR. In order to maintain their quotation, the present shareholders would have to buy new shares. The Erste Bank shares have remained constant yesterday. The announcement can indicate the fact that the offer made went over the initial estimations of the bank. COMPETITION. Andreas Treichl, the Erste Bank president (left) and Teixeira Pinto, the BCP president, are preparing their offers.