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Austrian BAWAG bank sells CEE subsidiaries

The owners of Austria’s BAWAG bank, US-based hedge funds Cerberus, is speeding up the bank’s consolidation process, reversing course in BAWAG’s expansion plans in Central and Eastern Europe.

On Tuesday, the board of Austria’s fifth-largest bank announced plans to sell of its Istrobanka and BAWAG Bank CZ, BAWAG’s subsidiaries in Slovakia and the Czech Republic. Both banks together employ around 1,000 staff and have an asset value of around €230 million ($326.8 million). BAWAG officials did not comment on their price expectations for the two banks, but analysts expect the banks to fetch around €460 million. Reason for the sell-off was that both banks failed to achieve their targets of reaching a 5% market share, BAWAG CEO Ewald Nowotny said according to the Austrian press agency.

The sell-off marks a complete turnaround from BAWAG’s previous CEE strategy. When Nowotny entered the bank’s helm in early 2006, he announced plans to double the business of BAWAG’s eastern daughters. Selling its 10% share in the Hungarian MKB bank was currently not being discussed. BAWAG will also retain its activities in Slovenia, Malta and Libya. In another consolidation move BAWAG last month announced the sale of its Austrian real estate property, the first batch of which is expected to earn the bank around €500 million ($710.5 million). BAWAG also intends to sell its share in the Austria private TV station ATV, piano maker Boesendorfer and its share in the Austrian lotteries by the end of 2007.

Analysts expect that around €1 billion will flow into BAWAG’s coffers after these measures have taken effect, adding another €500 million with the sale of the Czech and Slovak banks. (m&