Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Latvia To Split And Sell Nations Leading Bank

The Latvian government have decided to split up the nations leading bank, Parex Bank. The non-core business will be kept in the old bank, but the new financial creation, containing about two third of Parex Bank’s total assets, will be put up for sale. There’s only one small problem; the Latvian bank’s assets mainly belongs to the largest Scandinavian banking groups.

“After assets and liabilities are split off, the Parex banka will need additional financial support from the State in the foreseeable future.”

The Latvian government have agreed to divide Parex Banka, creating a new bank that will gain most of the lender’s assets before being sold. About two-thirds, or about EUR 2.1 billion, of the bank’s assets will be placed in the new company, including about half the lender’s loan portfolio, with the non- core business left in the old bank.
According to the Latvian newspaper Diena, the plan to split the bank may open the decision to a legal challenge because the previous owner’s subordinated capital may be left in the old bank.
A group evaluating the alternatives considered the proposal to break up the bank to be “optimal,” Finance Minister Einars Repse says.
“The government took this decision unanimously,” Prime Minister Valdis Dombrovskis told reporters Wednesday after a government meeting in Riga.
Foreign Minister Maris Riekstins, whose party left the government last week, didn’t participate in the vote.
The plan must still receive approval from the European Commission.

The government must turn in a plan for Parex to the European Commission by the end of this month, the newspaper Diena report.

The Swedish bank Nordea AB and the Norwegian owned DnB Nord Banka are among banks mentioned as possible buyers of the new Parex, Diena writes.
Other potential buyers may be the Polish PKO Bank Polski SA and the German Alfa Bank and Raiffeisen Bank.

The Latvian state asset sales department owns 73.4 percent of Parex and the European Bank for Reconstruction and Development holds 22.4 percent.
The remainder is owned by minority shareholders.

Still, about 65 percent of Parex Banka’s total assets is loans and deposits by the major Scandinavian banking groups; Swedbank, SEB, Nordea and DnB NORD/DnB NOR.


Disclosure: No position