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Romania cancels bank sale, says national bid too low - extended

Romania canceled the planned sale of a controlling stake in Casa de Economii si Consemnatiuni SA, the country's last state-owned bank, saying National Bank of Greece SA's offer of €560 million ($739 million) was too low.

National, the biggest Greek lender, made the only improved offer for the 69.9% stake in the Romanian bank, known as CEC, Finance Minister Sebastian Vladescu said. Hungary's OTP Bank Nyrt, the other bank that made the final round of bidding, didn't make an improved offer, he said. „The privatization committee agreed unanimously to ask the government to stop the privatization process,” Vladescu told reporters in Bucharest today. The National bid was „below what we expected” and the Romanian company won't renew the sale process for at least two years, he added. The government has delayed the sale of CEC repeatedly since July, when OTP and National were chosen as the final bidders, as Romania looks for a higher price and seeks to retain some control over the company. Opposition politicians have been protesting the plan to sell the bank, which has traditionally served Romanians in poorer and rural areas. The privatization committee will propose to the government ways to make CEC a „truly solid banking institution” that will „make Romania and Romanians proud for 100 years to come,” Vladescu said. CEC, which has more branches than any other bank in Romania and 4% of the country's market, „needs a lot of investment” to face rising competition in Romania, he added.

The government in the former communist country has been selling assets before Romania joins the European Union on January 1. A year ago, Austria's Erste Bank AG agreed to buy almost two-thirds of Banca Comerciala Romana SA, Romania's biggest lender, for €3.75 billion. Further delays and uncertainty over the sale of CEC may erode market share and prevent the bank from competing against rivals, International Monetary Fund Executive Director Jeroen Kremers said in comments published in the newspaper Ziarul Financiar yesterday. National may return some of its „excess capital” to shareholders after the CEC deal fell through, spokesman Grigoris Papagrigoris said today in a telephone interview. The amount will depend on how much the lender spends on its expansion plans in Ukraine and Turkey, he added. „We'll keep expanding in Romania through organic growth,” Papagrigoris said. The company, whose Romanian Banca Romaneasca unit has 55 branches, plans to double that number by the end of next year.

OTP Bank submitted a binding bid for the stake on July 17, 2006 in a privatization process, which had dragged on for more than a year. The bank stressed in the announcement that it has concentrated significant financial and human resources on the development of its Romanian subsidiary OTP Bank Romania, which it acquired in 2004. In an interview published on Wednesday, OTP Bank CEO Sándor Csányi said CEC had become less important. „We have not given up on CEC - we cannot, as we submitted a binding bid - but one has to see that the transaction has seen a big delay, and, at the same time, our Romanian bank has developed at such a pace that CEC is obviously less important than it was half year ago," Csányi said. He added that OTP Bank Romania's (OBR) market share in some segments is already bigger than that of CEC. (Bloomberg, Mti-Eco)