Serbia’s second largest lender Komercijalna Banka is set to return to profit this year after cleaning up its bad loans, its chief executive told Reuters.
The Serbian government is due to sell its 41.7 percent stake in the lender this year but a decision has not yet been taken on whether that would be an IPO or a private sale, CEO Alexander Picker said.
“Which way the privatisation goes, remains to be seen. Everything is possible, from a strategic investor, a fund, or even an IPO, but the answer to this question is up to shareholders,” he said in an interview with Reuters conducted on Monday.
Komercijalna is expected to report a second straight annual loss for 2016, partly because it made provisions against bad loans which had totalled 25 percent of its lending.
“It (2016) was a difficult year. We finished the clean-up of the problem loan portfolio and other impairments,” Picker said.
“We went to every small closet we could find and we hopefully did dig up all the skeletons, pulled them out and cleaned them,” he said.
That should enable it to turn a profit this year, he said.
The bank swung into the red in 2015 with a 7 billion dinar ($61 million) loss.
Picker said it would focus on developing new digital products and providing services to small and medium sized enterprises.
“We do see potential in the area of public finance,” he said adding that the bank had recently provided a refinancing loan to the regional government of Vojvodina in northern Serbia.
The Serbian government is the bank’s biggest shareholder and the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), part of the World Bank group, own 24.4 and 10.1 percent respectively.
Komercijalna has a 12.9 percent share of Serbia’s banking market in terms of assets, trailing Banka Intesa, part of Italy’s Intesa Sanpaolo.
Nomura was appointed in 2015 to advise on the sale of the government’s stake, one of a number of planned privatisations of state companies as part of broader economic reforms in Serbia.
“From the side of management we are working full steam in order to get the bank in the best shape possible,” Picker said.
Serbia’s banking sector is dominated by foreign-owned banks but has been hampered since 2009 by non-performing loans, which still accounted for 19.5 percent of total loans in the third quarter of last year, among the highest ratios in central Europe.
Despite that the banking sector remains well capitalised with an average capital adequacy ratio of 21 percent, way above the central bank minimum of 12 percent. However it is a very competitive field with 30 banks vying for customers in a country of just 7 million.
“The question is how this capital will be employed,” Komercijalna’s chairman of the board, Vladimir Krulj, told Reuters.
“One may expect consolidation in the banking sector in Serbia, and some of the size-matter banks could potentially buy portfolios of those (Greek) banks that are about to leave,” he said.
Greece’s Alpha Bank said on Monday that it had reached a deal to sell its wholly owned subsidiary Alpha Bank Srbija to Serbia’s MK Group, which is involved in a range of businesses.
Analysts say other Greek lenders could also pull out of Serbia as they restructure in the wake of Greece’s debt crisis.
