Foreign Buyers Interest in Croatia Bank Purchase Lies in EU Ticket

Lauren Simmonds

As Poslovni Dnevnik/Ana Blaskovic writes on the 9th of November, 2020, three players remain in the race to purchase Croatia bank, which brings with it a 0.5 percent market share as a dowry and a much more important prize in the form of a regulator’s ticket to the Croatian and European Union banking markets.

The received offers for Croatia bank are being looked into, two are “very solid”, and the final word will be given by the Croatian National Bank, which will assess whether the bidders who have opened the door to enter the market are “fit and proper” enough to actually go through them.

“The idea is, of course, to get as much money as possible, and the two received offers in that sense are very solid.

“Given the situation regarding takeovers in the sector in general, the fact that small banks are ”trading” between 0.3 and 0.5 of the carrying amount, that the bank is rehabilitated and attractive for a license, everything above that is great,” said a well-informed source who requested anonymity due to the sensitivity of the process surrounding Croatia bank. After the evaluation of the documentation, the assessment of possible additional conditions for the implementation of the transaction, which may or may not mean another round and additional ”ironing out” of bids hasn’t been excluded.

“After that, we’ll hand over the baton to the CNB, which will make a decision on the suitability of the investor,” explained the above interlocutor.

100 percent state-owned through DAB, the State Agency for Deposit Insurance and Bank Rehabilitation, Croatia bank holds a very marginal 0.4 percent of the market, and at the end of June it generated HRK 4.7 million (gross) profit. It ended last year with a loss of almost HRK 25 million, and in the last three years the losses have cumulatively eroded its capital, reaching almost HRK 80 million, so the issue of the necessary recapitalisation has been rightly brought to the fore.

After years of strategic ”wandering” in which the future of Croatia bank was imagined in various scenarios, from a platform for the synergistic gathering of other small players to strengthening the state’s lever of influence on the market, in July it was decided to go ”to the drum”. Since then, four offers have arrived; “From the financial and banking sector from stakeholders” from the US, Hong Kong and two from elsewhere here in Europe. After an in-depth survey, three binding offers were received by the sales committee by the end of October. The deadline for weighing them all up is November the 20th, 2020, so the bank, if everything goes smoothly, should get a new owner by the end of the year.

It is worth noting that there are no Croatian players among the offers. Connoisseurs of these types of processes aren’t surprised by this, because the acquisition of Croatia bank has certainly been assessed as a poorly profitable venture even after repeated rehabilitations. The same, obviously, applies to the (mostly state-owned) HPB, which decided to pull the brakes after taking over Jadranska banka.

As far as foreign players are concerned, however, Croatia bank is equal to the de facto purchase of a regulator license. In the local market and economy, which before the coronavirus struck barely enjoyed growth rates of 3 percent of GDP, the earnings are limited: last year, 20 players shared HRK 5.8 billion. However, from the perspective that in the last more than two decades no bank has been established “from scratch”, and that the license for Croatia bank also carries the one for the entire EU, the potential takeover takes on other, more meaningful dimensions.

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