The Latvian Privatisation Agency (PA)has announced that the Finance and Capital Markets Commission (FKTK) has submitted a draft decision about taking over participation in the Citadele Bank’s shareholder structure to the European Central Bank (ECB), which is due to take its own decision on the matter in the near future. Because the bank has subsidiaries in Lithuania and Switzerland, the approval of regulators in those countries is also necessary, and the relevant institutions are still reviewing the relevant documents, the PA says.
The PA itself has submitted a report to the European Commission about the involvement of new investors in the Citadele Bank, explaining what has been done and noting that the transaction will be completed once the relevant institutions take their decisions – something that is beyond the control of the PA. Accordingly, the European Commission is aware of the fact that the transaction will be completed shortly, but after the initially specified deadline. The PA expects the Commission to be understanding about the postponement.
In accordance with the agreement on selling shares in the Citadele Bank, an audit of the bank’s 2014 operating results is to be conducted, and a mechanism to adjust the sales price must be created. An independent auditor is doing the work and will submit the findings to the parties that are involved in the deal.
The bank’s investors, the PA, the Citadele Bank, the European Bank for Reconstruction and Development (EBRD), the Finance Ministry and the National Treasury are working on a packet of documents needed to complete the transaction.
As has been reported in the past, late last year the government approved the Ripplewood Advisors LLC subsidiary RA Citadele Holdings LLC as the bank’s investor, and documents were filed with the FKTK to receive authorisation for the process. According to the sales agreement signed on November 5, 2014, RA Citadele Holdings LLC and a group of 12 international investors wish to purchase the state’s shares in the bank, or 75% minus one share. In evaluating the investor, the FKTK looked at five major criteria that are defined by law – sufficiency of free capital, financial stability, the legality of the resources used for the investment, the investor’s reputation, and the business plan. The ECB is involved because of a unified oversight mechanism that was implemented last November and says that all major decisions related to bank oversight in Europe must be taken in partnership between the relevant government institutions and the ECB.
Last November’s agreement says that the investor will pay EUR 74 million for the Citadele shares, though the price may change in accordance with the bank’s 2014 operating indicators, as compared to forecast indicators. Any increase in the price will be invested in the bank’s capital.
As has been reported in the past, Ripplewood will own 22.4% of shares after the transaction, the other international investors will control 52.6% of shares, and the EBRD will retain its 25% of shares.
Unaudited results show that the Citadele Group concluded 2014 with a profit of EUR 31.1 million, or 129% more than in 2013. The group had total assets of EUR 2.85 billion, a lending portfolio worth EUR 1,08 billion, and a deposit portfolio worth EUR 2.52 billion.