Bloomberg News

Lithuania Bank Merger Talk Sparks Interest in Ukio Bankas Shares

December 19, 2012

AB Ukio Bankas (UKB1L) shares were the most active since February after a news portal said the Lithuanian central bank wants to merge it with AB Siauliu Bankas (SAB1L) with aid from the European Bank for Reconstruction and Development.

Volume of 1.5 million shares by 11:45 a.m. in Vilnius was higher than any day since Feb. 2, according to data compiled by Bloomberg. The shares were unchanged at a nine-year low of 0.11 euros, valuing the company at 38 million euros ($50 million). No trading of Siauliu Bankas shares took place on the exchange.

The Bank of Lithuania wants the EBRD, Siauliu Bankas’s biggest shareholder, to help it merge the two lenders to avert a deterioration of the unprofitable Ukio Bankas, Eversus.lt reported today, without saying where it got the information. It would create the Baltic nation’s third-biggest lender by deposits after the units of SEB AB and Swedbank AB. (SWEDA)

The EBRD, which said today it won’t comment specifically on the transaction, listed actions “to support strengthening and consolidation of local banks” as a priority in the Strategy for Lithuania published on its website last month.

The Bank of Lithuania won’t comment on the situation, spokesman Giedrius Simonavicius said by phone in Vilnius today.

Shareholder Losses

Kaunas-based Ukio Bankas shares have declined 28 percent since Oct. 29, when it reported a group net loss of 44 million litai ($16.9 million) for the first nine months of this year.

Following the collapse of Russian-owned AB Bankas Snoras a year ago, Ukio Bankas, whose majority owner Vladimir Romanov is also Russian-born, has had to offer higher interest rates to attract depositors and offset a lack of demand for its bonds.

A merger with Siauliu Bankas could only work if the EBRD agreed, Baltic investment bank Finasta analyst Tadas Povilauskas said today in a note to clients.

“Such a merger would not be positive news for the minor shareholders of Ukio Bankas, the value of which would probably be depressed,” Povilauskas said.

The EBRD owns 43 percent of Siauliu Bankas, which is based in the northern Lithuanian town of Siauliai.

EBRD Position

“We continue our work with Siauliu Bankas, a long-standing partner of the EBRD in Lithuania,” the bank’s Head of Media Relations Anthony Williams said by phone today from London. “As always, the EBRD will review opportunities as they arise.”

In its Lithuania strategy document, the EBRD said the failure of Snoras in November 2011 showed a need “to enhance the governance and the financial strength of local banks, possibly through assistance in consolidation.”

“The bank will consider, primarily through the EBRD’s existing shareholding in Siauliu Bankas, opportunities to play an active role in the process,” it said in the policy document.

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

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


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