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Lithuania Bank Merger Talk Sparks Interest in Ukio Shares

AB Ukio Bankas shares were the most active since February after a news portal said the Lithuanian central bank wants to merge it with AB Siauliu Bankas with aid from the European Bank for Reconstruction and Development.

Volume of 1.5 million shares in Vilnius was higher than any day since Feb. 2, according to data compiled by Bloomberg. The shares rose 0.9 percent from a nine-year low to 0.111 euro, valuing the company at 38 million euros ($51 million). Siauliu Bankas shares fell 0.4 percent to a 52-week low of 0.23 euro.

The Bank of Lithuania wants the EBRD, Siauliu Bankas’s biggest shareholder, to help it merge the two lenders to avert a deterioration of the unprofitable Ukio Bankas, reported today, without saying where it got the information. It would create the Baltic nation’s third-biggest lender by deposits after the units of SEB AB and Swedbank AB.

The EBRD, which said today it won’t comment on that possible transaction, listed actions “to support strengthening and consolidation of local banks” as a priority in the Strategy for Lithuania published on its website last month.

The Bank of Lithuania won’t comment on the situation, spokesman Giedrius Simonavicius said by phone in Vilnius today. Ukio Bankas has nothing to say on the matter, spokeswoman Aukse Armonaite said in an e-mailed response to questions.

Shareholder Losses

Kaunas-based Ukio Bankas shares have declined 28 percent since Oct. 29, when it reported a group net loss of 44 million litai ($16.9 million) for the first nine months of this year.

Following the collapse of Russian-owned AB Bankas Snoras a year ago, Ukio Bankas, whose majority owner Vladimir Romanov is also Russian-born, has had to offer higher interest rates to attract depositors and offset a lack of demand for its bonds.

A merger with Siauliu Bankas could only work if the EBRD agreed, Baltic investment bank Finasta analyst Tadas Povilauskas said today in a note to clients.

“Such a merger would not be positive news for the minor shareholders of Ukio Bankas, the value of which would probably be depressed,” Povilauskas said.

The EBRD in 2010 increased its stake in Siauliu Bankas to 19.57 percent, from 16.06 percent, by converting part of a 30 million euro loan it granted in 2009 to help the lender based in the northern Lithuanian town of Siauliai weather a crisis, according to a Nov. 23, 2011 statement on the EBRD website.

EBRD Position

“We continue our work with Siauliu Bankas, a long-standing partner of the EBRD in Lithuania,” the bank’s Head of Media Relations Anthony Williams said by phone today from London. “As always, the EBRD will review opportunities as they arise.”

In its Lithuania strategy document, the EBRD said the failure of Snoras in November 2011 showed a need “to enhance the governance and the financial strength of local banks, possibly through assistance in consolidation.”

“The bank will consider, primarily through the EBRD’s existing shareholding in Siauliu Bankas, opportunities to play an active role in the process,” it said in the policy document.

Siauliu Bankas had net income of 11.2 million litai in January to September, 4.1 percent more than in the same period of 2011, according to a report on its website.

“From our side nothing has happened,” Donatas Savickas, Siauliu Bankas’s deputy chief executive, said by phone today from Siauliai. “We don’t have any facts beyond what’s written in the press” about a possible merger, he said.

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