Carpatica, based in Sibiu, is in the “little league” of lenders, holding less than 1% of the overall local banking system, which cumulates EUR80 billion in assets.
Since its establishment in 1999, the bank’s strategy has been built around the financing of small and medium-sized enterprises, with the institution focusing on supporting Romanian capital.
But this particular niche was among the most hurt by the crisis and forced the bank to set up massive provisions for non-performing loans and to take losses.
After a very difficult 2010, Carpatica managed this year to cut its losses. In the first nine months of the year Carpatica cut its losses 4.6 times, from 115 million lei to RON25 million (EUR5.7 million).
The bank’s total revenues were down 22.6% to RON454 million, as a result of the decline in revenues from fees and financial operations.
But spending was down 31.8% as a result of the significant decline in provisions for bad loans.
The loan portfolio amounted to RON927 million, down 3% against the beginning of the year. Deposits attracted were up 2.8% to RON2.47 billion.
Despite visibly improving its financial results, the bank recorded a downward trend on the stock exchange this year, in part due to contamination by investor uncertainty over the situation of the overall banking sector.
Carpatica shares fell 32.5% in 2011, which compares with a decline of 22.6% for the shares of Banca Transilvania (TLV.RO) and by 11% of BRD-Groupe Societe Generale (BRD.RO) shares.
The only event that gave a boost to the bank’s shares was the unofficial information on the possibility of UK investment fund AnaCap becoming a shareholder, alongside businessman Ilie Carabulea, who owns 41.28% of the capital.
The information fuelled rises of over 15% in two consecutive days (October 4 and 5), while the rest of the banking shares underwent major corrections.
But although the bank’s management did not confirm the existence of negotiations, analysts expect this transaction to take place.
“The bank’s progression over the next year will depend on whether there will be an acquisition of BCC shares by a foreign investor, on how large this stake will be and on how much the future shareholder will become involved in the bank’s management. I think this transaction is unavoidable because otherwise the bank will find it very difficult to cope on its own with the increase in the cost of financing and in provision costs. With a market share of less than 3-5% it is very hard for a bank to be profitable,” said Adriana Marin, head of the analysis department of brokerage UniCredit CA IB Securities.
Mihai Chisu, broker at IFB Finwest brokerage, explains why in October stock exchange investors thought a prospective new shareholder was a piece of good news, and prompted shares to rise 15%.
“Investors want to know how strong the shareholders are and if they can finance the bank’s activity in the long term. The information on a prospective foreign investors becoming a shareholder has been perceived by investors as a measure of bank consolidation.”
According to the latest information, Sibiu businessmen Ilie Carabulea, with 41.28% in the bank, and Corneliu Tanase, with 11.21%, are the bank’s largest shareholders. Ilie Carabulea was the one who supported the bank the most in the last few years.
Forced by circumstances, Carpatica has in the last few years conducted several capital increases in order to cover its losses, but the RON113 million raised in the wake of three such moves have been mainly contributed by main shareholder Ilie Carabulea.
Whether or not a transaction will take place at Carpatica will also depend on the main shareholder. In November, Alin Albu sold 3.8% of the shares for EUR1.65 million.
In 2009 he inherited the Carpatica shares from his father, Aurel Albu, who died two years ago. There is no information as to who bought the shares.
AnaCap in advanced negotiations to buy into Carpatica
Having started in September, talks between the London-based private equity fund AnaCap and businessman Ilie Carabulea, the main shareholder of Banca Carpatica, have advanced slowly and are approaching a conclusion, say banking sources.
“BNR could over the next few weeks get the file on the transaction which is under discussion,” say the quoted sources. (EUR1=RON4.3505)