A mixture of Maltese, EU and non-EU entities are in the running to bid for Volksbank Malta, with the management team hopeful that the negotiations could start next year following the due diligence exercise now under way.
“We hope to be able to identify one or perhaps two bidders by then so that negotiations can start,” managing director Herbert Skok said.
The sale is the result of the purchase by the Austrian state of 43 per cent of its parent company, Oesterreichische Volksbanken-AG, in 2012, one of the conditions of which was that it would divest itself of its overseas network, ranging from regional and specialised banks, and credit cooperatives, to Volksbank in Malta.
The process of selling Volksbank in Malta started in April, when the management team started to downsize its overseas investments, which were sold to other banks outside Malta.
“We didn’t want to delay the process. As the shareholder we are not helping the bank to grow – we are in exit mode, so the sooner we are out of the way, the better. Once you know that the bank is going to be sold, it does not make sense to wait, for either the staff, the profit and loss, or any other stakeholder,” shareholder representative Klaus Gugglberger said.
An advisor on mergers and acquisitions was appointed in mid-September and around 130 parties expressed initial interest. Around 20 of them gave positive feedback, with half of them being sent detailed information with an invitation to bid.
The sale has to be concluded by the end of 2015, so even if no one from the current batch of suitors is deemed suitable, there is still plenty of time for a second round.
The process started with the offloading of all international business, particularly involvement in syndicated loans. As a result, the balance sheet has been reduced from €1 billion to €211 million, now made up completely of local business.
“It did not make sense to sell a mixed story. It would be easier to offer it as a clean sheet for the next owner who can then use its strong resources to grow its own story,” Mr Gugglberger said.
“That way we avoid a situation where we get into a long discussion with the new owner on what business they want to keep and what they want to sell, which could delay the process.”
Mr Skok stressed that the bank, which made a profit of €2.2 million in 2012, has a very strong team for its size, with eight of its 33 staff approved by the regulator.
“Whether you have one branch or a dozen, you still need to have all the regulatory functions in place, so we are able to offer the new owner immediate capacity to grow. And we do not only have our retail licence to offer... We are also heavy on assets and not on deposits, unlike many other local banks,” he said. Volksbank Malta has €15 million in retained earnings.
“Local businesses know us well and trust us because of our personalised service. We get new requests for loans every day. And the international business can be rebuilt very fast; just as it was easy to sell our stake in syndicated loans, it will be easy to buy back into them.”
With clients happy to stay on board, the other challenge was to retain staff, and thanks to regular and transparent communication sessions, only three moved on, all of whom were replaced.
“It is work as normal. We want to be sold as a going concern,” Mr Skok said.