WASHINGTON, D.C., June 24, 1999 –The International Finance Corporation will invest in a former state-owned bank in the Czech Republic with the largest equity investment it has ever taken in any bank anywhere. IFC agreed today to take an equity investment of approximately US$75 million for a 4.3 percent shareholding in Ceskoslovenska Obchodni Banka (CSOB), the first of the three remaining large state-owned Czech banks to be privatized.
CSOB is one of the Czech Republic's main banks and one of the largest banks in Central Europe. Its transfer to new management and ownership is the cornerstone of the government's reform plan for the financial sector. The privatization is expected to improve CSOB's corporate governance and overall management systems and controls, which, in turn, should bolster the real sector, domestic savings and economic growth in both the Czech Republic and Slovakia.
The strategic investor is KBC Bank N.V. of Belgium, which will invest about US$1.1 billion for a 65.7 percent stake.
Mr. Jemal ud-din Kassum, IFC's Vice President for investment operations said that IFC has confidence that KBC will help CSOB become a model institution, and will encourage the government's other financial sector reform efforts. Kassum noted that IFC's support for this transaction spanned several years and that the agreement reflected longstanding close cooperation between the government, CSOB's management, KBC and IFC.
IFC has made support for private financial intermediaries one of its major long-term priorities, putting its own equity and debt resources at risk to back up its commitment. Support for CSOB is very much in line with this priority. In the Czech Republic, IFC was involved in the first bank privatization in Eastern Europe - Zivnostenska Banka, in 1992.
To date in the Czech Republic, IFC has participated in transactions in the industrial, power and other sectors worth well over US$1 billion. In Slovakia, IFC has financed investments in several mid-sized industrial projects, in consumer goods, pharmaceuticals and is well advanced in new large financings for paper and packaging materials production and also a credit line to finance more industrial projects via local banks.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
