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Privatization of banking sector

By Milorad Katnić, Assistant Minister, Ministry of Finance, Podgorica, Montenegro

The Government controlling package of shares of Podgorička Banka a.d., worth €14.2 M, was sold in October 2005 to the Société Générale Group. It offered €385.00 per share for 64.4% of shares of Podgorička Banka, which belong to the State and the Pension and Disability Insurance Fund. The French banking group has stated it plans to invest another €40 M into the bank that made €3.6 M profit in the first half of the year.
Soon after, in November, Société Générale Group purchased in the Nex Montenegro stock exchange another 10% of shares of Podgorička Banka, worth some €2.2 M.

See online: Ministry of Finance.

The Council for Privatization adopted the Decision on Initiation of Privatization Procedure of Podgorička Banka a.d., Podgorica, Montenegro in November 2005, by selling majority shares package owned by the state by means of an international tender. Mr. Milorad Katnić, Ministry of Finance
Given the planned activities volume and significance of privatization of Podgorička Banka, the Commission for privatization in the banking sector stated the need of a financial advisor engagement and in accordance with that the top-rated company IAAG Consultoría & Corporate Finance from Madrid, Spain was chosen by the tender.

On proposal of the financial advisor, the Decision on Public Invitation for Bids to express interest for majority share package purchase in privatization of Podgorička Banka a.d. was made on May 11, 2005.
Written applications were submitted within the deadline by the following companies: Société Générale, Paris, France and Steiermärkische Bank und Sparkassen AG, Graz, Austria.
Then the Public Invitation for Bids for majority share package sale of Podgorička Banka a.d. was announced in June 2005, both in domestic and foreign magazines. One Bid was submitted within the deadline by the company Société Générale.

Société Générale Group As it was concluded that Société Générale met all the necessary conditions envisaged by the bid, the Agreement on Purchase-Sale of Shares was signed in October. Thus, 64,4% of the state-owned shares was sold at the price of €385.00 per share. Nominal price of shares was €255.65 per share, and average trading price in stock exchanges in October amounted to €249.32 per share [1]. In addition, by the Agreement on Purchase-Sale of the Company, it bound itself, inter alia, to invest into the Bank another €40 M until 2008.

Tradition, reputation and rating of Société Générale in the world, say enough about the significance and benefits of getting this company as strategic partner as well as that Montenegro became stable and attractive market, interesting, in particular, for investments in the financial sector, even for the biggest world companies.

[1] Directly upon the privatization process, the state share in the ownership structure of Podgoricka Bank amounted to 55.64%, and Pension and Disability Fund 4.14%. Pursuant to the agreement with the IFC the state exchanged 10% of its ownership for the old debts, in which way the Podgorička Banka got International Finance Corporation as strategic partner.
At the same time, the Ministry of Finance started the procedure of exchange of old debts which were hard to be collected from the companies (mainly and dominantly state-owned), which owned the Podgorička Banka shares in the portfolio.
Thus, the state ownership in Podgorička Banka increased by 15% or 4,364 shares, and debt to the amount of €1,115,656.60 was converted. By the sale of total state-owned shares package in Podgorička Banka at price of €385.00 per share, capital profit was realized to the amount of €546,438.40 for the shares package acquired by debt conversion.
Furthermore, over €1 M debts, which dominantly belonged to the category of hardly recoverable debts, were completely collected in this way.