JP Morgan likely to land CEC privatisation consultancy contract

International investment bank JP Morgan is very close to being awarded the consultancy contract for the privatisation of the Romanian Savings Bank (CEC), as the final decision is only pending approval from the World Bank, according to sources close to the consultant's selection process.

JP Morgan would thus get ahead of the other two contenders, investment banks Credit Suisse First Boston (CSFB) and Citibank, which were shortlisted from six potential consortia.

According to market sources, JP Morgan is likely to win the contract due to the small retainer requested, since its competitors all asked for success fees ranging between 1.8-2 percent.

The above-quoted sources say that JP Morgan only asked for a retainer worth 200,000 US dollars, much smaller that the requests made by Citibank and Credit Suisse First Boston - more than 500,000 USD.

The very small retainer asked by JP Morgan has already sparked controversy on the market, as the bank will incur losses if the privatisation process fails. The bank will have to use the retainer to pay its own experts, but also the other companies it teamed up with to form the consortium - London-based law firm Linklaters, investment fund Romanian American Enterprise Fund and a real estate consultant.

"I cannot say anything before an official announcement is made. All I can say is that we submitted a competitive offer," Florin Vasilica, JP Morgan country manager for Romania told Ziarul Financiar.

Credit Suisse First Boston was considered JP Morgan's main rival in the race for landing the CEC contract. CSFB is the investment bank that assisted the Romanian State during the privatisation of SNP (National Oil Company) Petrom and provided consultancy to Italian group Enel for the privatisation of two arms of the Romanian energy distributor Electrica.

The Ministry of Finances, the main shareholder of the Savings Bank, said the selection process had not been completed yet.

The CEC privatisation is one of the last large consultancy deals on the Romanian market and is likely to bring several million dollars to the institution that will handle the process. For instance, investment bank Credit Suisse First Boston, together with the team that was part of the consortium, is to cash some 20 million dollars for having counselled the Romanian State in the Petrom privatisation.

The Romanian State has pledged to privatise CEC, with the name of the future shareholder to be known by the end of next year.

The old financial institution has 1,497bn ROL (36.5m euros) in capital and, at the end of July, held total assets worth 46,050 billion ROL, namely 1.13 billion euros. Gross profit amounted to 569 billion ROL (13.9 million euros).

The slow CEC restructuring, mainly in terms of modernisation and adjustment to the market, has led to a constant shrinkage of the bank's market share. At the end of June 2004, CEC's market share in terms of assets compared to the entire banking system dropped to 6.37%, down from the 7.5 percent it had at the end of June 2003.

Austrian banks Erste and Raiffeisen have so far voiced interest in CEC. The future shareholder will have to make significant investments in restructuring.
laurentiu.ispir@zf.ro