Privredna Banka Zagreb - capital increase

complete

The proposed project will consist of the subscription of newly issued shares of Privredna banka Zagreb (PBZ) as a part of the capital increase to take place in August 2006. The capital increase will strengthen PBZ’s capital base, allowing further growth of the bank’s operations. EBRD’s participation in the capital increase will support one of the largest and the most profitable commercial bank in Croatia. EBRD’s original investment in PBZ was instrumental in supporting the full privatisation of the bank and in strengthening its shareholding structure. Such objectives were achieved and EBRD’s role in PBZ has been particularly important in improving corporate governance standards. The transaction is a follow up to the original equity investment and will allow the EBRD to fully participate in the upside resulting from the successful restructuring of PBZ after privatisation. EBRD’s role in PBZ will continue as the bank is affirming its position in the Croatian market and expanding regionally, thus in need of capital for additional growth. PBZ is the second largest Croatian bank, with a 19.2% market share of total banking assets as of end-December 2005. As of the same date, its total assets amounted to EUR 6.4 billion, total equity was EUR 601 million and net profit EUR 102 million. PBZ is majority owned by Gruppo Banca Intesa (“Intesa”). PBZ continues to register strong performances, in line with its peers in terms of growth and outperforming the market in terms of profitability. Being the second largest bank in Croatia by total assets, PBZ is the market leader in credit card business and corporate finance. PBZ is also a market leader in the foreign exchange and government paper market. Subscription of newly issued shares of PBZ, as part of a capital increase to take place in August 2006. Total capital increase will be EUR 250 million. Screened FI. Privredna Banka Zagreb (PBZ) is managing the reputational and, to a lesser extent, the financial risks associated with its clients through the implementation of the EBRD’s Environmental Procedures for Financial Intermediaries, which PBZ adopted as a condition of the existing equity investment and mortgage loan. PBZ will be required to continue to implement the EBRD’s Environmental Procedures for Local Banks for all its lending activities including the compliance with EBRD’s Environmental Exclusion and Referral Lists; ensuring the compliance of sub-borrowers with national standards of environment, health and safety; the compliance with relevant national employment laws and standards and Conventions of the International Labour Organisation (related to the employment of children and young people, discrimination at work, and forced labour); ensuring the compliance by sub-borrowers with relevant requirements for public disclosure and consultation, when applicable. PBZ’s has submitted a satisfactory annual environmental, health and safety report for 2005 to the Bank and it will continue to submit annually environmental, health and safety reports. None.