Bloomberg News

Latvia to Delay Citadele Sale Amid EU Crisis, Dombrovskis Says

December 28, 2011

Dec. 28 (Bloomberg) -- Latvia will delay the sale of Citadele Banka AS, the state-owned retail lender formed from Parex Banka, because of the euro zone’s spreading crisis, Prime Minister Valdis Dombrovskis said.

“It’s an obviously unfavorable situation” for the deal, Dombrovskis said in an interview with Latvijas Radio today. The government’s adviser, Nomura International Plc, recommended postponing the sale to the second half of next year from early 2012, Dombrovskis said. The lender must be sold by 2014, he said, citing an agreement with the European Commission.

Citadele was split from Parex, once the Baltic nation’s second-biggest lender, after a run on deposits triggered a government rescue in 2008. Latvia was then forced to turn to a group led by the European Union and the International Monetary Fund for a 7.5 billion-euro ($9.8 billion) bailout.

The decision to delay the sale is “a logical step and it is in line with the interest of society and the state,” Juris Jakobsons, chairman of Citadele, said in an e-mailed statement.

Citadele is 75 percent owned by the Latvian government, with the rest held by the European Bank for Reconstruction and Development.

The lender’s credit rating was lowered two levels to B2 from Ba3 with a negative outlook on Dec. 16 by Moody’s Investors Service, which cited “deterioration of asset quality beyond Moody’s expectations at the bank’s inception in August 2010 and the low capitalization levels.”

The share of problem loans, including impaired and restructured credits as well as facilities overdue by 90 days, reached 38 percent of Citadele’s total lending, according to Moody’s.

“Rising problem loans, combined with the agency’s expectation of continued low profitability, would exert significant pressure on already low capital levels,” the rating company said in the statement.

--Editor: Paul Abelsky

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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