Showdown for control of BOŚ

The struggle for control of environmental investment bank Bank Ochrony Środowiska (BOŚ) is set to intensify between ecological investment fund Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej (NFOŚiGW) and the bank's largest shareholder, Sweden's Skandinavska Emskilda Banken (SEB), with a showdown expected at a Dec. 21 extraordinary shareholders meeting.

SEB, which holds a 45.99% stake, said it wants to take a majority share in BOŚ, and signed a deal with the fund in August to give it first refusal in any sale. But NFOŚiGW, which has a 44.36% stake, said it does not want to sell and has blocked any moves that might have given SEB greater involvement in the bank - either through a link-up of both banks' insurance units or by increasing its stake through a new share issue.

Recent speculation that the government may also want to abolish the fund as part of its expenditure cutting program adds to the confusion surrounding expectations as to what will happen at the bank's meeting next month.

"Some changes in the fund can be expected with the change of government," said Grzegorz Zawada, analyst at Erste Securities in Warsaw. "This could impact on the shareholder structure at BOŚ."

Analysts said the Finance Ministry might be considering changes in NFOŚiGW's management structure and shifting responsibility for earmarking public money for environmental projects to the Environment Ministry, which controls NFOŚiGW. But the government has yet to abolish NFOŚiGW and will not comment on its plans.

Analysts said SEB's increased stake will allow it to pump in investment and could see a shift in strategy away from ecological investments to more mainstream banking and a range of other services, including Internet banking and insurance. The bank is suffering from weak liquidity and its concentration on ecological investments, analysts said, was hampering any move into other areas where BOŚ could start to compete with big league banks. Analysts said SEB will likely kick BOŚ into the mainstream of Internet banking on the Polish market.

BOŚ press spokeswoman Grażyna Lewandowski said the bank "had no reason to complain about NFOŚiGW as a shareholder," although she admitted that if the government changed the fund's strategy the bank could look to other investors. "SEB has been looking to alter the bank's strategy and that could be the way," she said.

BOŚ shareholders decided in September against a new share issue for the bank at an extraordinary meeting of the management board. The share issue would have increased the bank's liquidity by zł. 234 million ($57 million) and was seen as a possible step in the direction of SEB taking a majority stake in the bank. NFOŚiGW rallied other smaller domestic shareholders - Dyrekcja Generalna Lasów Państwowych (DGLP), Wojewódzkich Funduszy Ochrony Środowiska (WFOŚ), Ciech and Polski Koncern Naftowy Orlen (PKN Orlen) - against the proposed issue of shares that had been earmarked for them. The share issue would have increased the bank's liquidity by zł. 234 million ($55.7 million) and was considered a possible step in the direction of SEB taking a majority stake in the bank.

SEB also reportedly wants to merge BOŚ' banking products with the insurance arm offered by SEB-owned insurance company Partner. Jarosław Wita, a member of Partner's management, said the company wants to remain an insurance firm but concentrate on specific areas such as Internet banking.

BOŚ, a corporate and retail bank, has a market capitalization of about zł. 1 billion ($243 million). The bank said it expects to see only a net profit of zł. 3.8 million ($926,000) in 2001, against zł. 18.8 million ($4.6 million) last year. The reason for the decline was the need to put aside reserves to cover bad loans as well as a drop in the value of companies in the bank's capital group. The bank had said it planned to see net profit of zł. 72 million ($17.5 million) this year. Its level of pro-ecological investments fell last year to zł. 906 million ($221 million) - 28.8% of total credits - from zł. 986 million ($240 million) or 37%, in 1999. NFOŚiGW has 7% of all BOŚ deposits (zł. 268 million ($65.3 million)). The bank also manages zł. 123 million ($30 million) worth of the investor's treasury bonds.

Joe Harper