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Baltics: Swedes Move Deeper Into Banking World

Vilnius, 11 January 1999 (RFE/RL) -- One of Sweden's biggest banks has further strengthened its presence in the Baltic states in a strategy designed to create an eventual springboard into Russia and Poland.

The Scandinaviska Enskilda Banken (SEB) is taking over a 32 percent share in the most profitable Baltic bank, Lithuania's Vilniaus Bankas. In a deal approved by shareholders on December 29, the Swedish bank will pay more than $55 million for the share.

The latest acquisition adds to similar-sized stakes SEB already holds in the Latvian Unibanka and Estonian Uhispank. It brings SEB's financial commitment in the Baltic banking world to some $100 million.

Lars Gustafsson, the head of SEB's strategy planning department, said that it is not going to join the three banks together and is not planning to purchase 100 percent of Vilniaus Bankas' shares. He said that the idea is that the three Baltic banks will remain local entities and their shares will be traded on their local stock exchanges. But Gustafsson acknowledged that the strengthening of SEB positions in the Baltics is an opening move in a broader plan of penetrating Poland and Russia.

Experts say that in turn is likely part of a broader strategy of staying competitive in the increasingly hectic European banking scene.

In the meantime, SEB says it wants to ensure that Vilniaus Bankas fulfills international standards and that its clients feel secure. It says new information technologies will be installed, and that the SEB banking group will be able to provide clients throughout the Baltics with a broad range of services at a higher quality.

Vilniaus Bankas had at one time projected a net profit of $18.4 million for 1998. But because of the crisis in Russia, the actual profit is expected to be lower. Following the purchase of shares by SEB, it is anticipated that Vilniaus Bankas will decrease its loan portfolio and pay more attention to retail banking.

The three Baltic banks now associated with SEB already had close links among themselves. Nearly a year ago, they signed a cooperation deal and were continuing to discuss further opportunities to consolidate their activities.

Vilniaus Bankas, together with its partners, has also managed to buy a sizable share in Lithuania's second largest bank, Hermis. In fact it has recently obtained permission from the country's Central Bank to purchase a majority stake in Hermis. For it's part, Hermis would prefer a strategic investor from abroad. As Raimondas Kutra, Vilniaus Bankas' vice chairman puts it: "Hermis is trying to run away from us, but we are very patient".

Analysts say the latest SEB acquisition could encourage other moves toward consolidation in the Baltic banking sector. At the moment, the outlines of two strong finance groups are to be seen in the Baltics. The Estonian Hansapank group has assets of $1.47 billion. The assets of the future SEB group could reach $2.1 billion.

(Garbaciauskaite is a contributor to RFE/RL, based in Vilnius.)