27802 - Cacanska Banka

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Summary of Proposed Investment

Project Number

27802

Company Name

HALKBANK A.D. BELGRADE

Date SPI Disclosed

Jul 2, 2010

Country

Serbia

Industry

Financial Markets

Projected Board Date

Aug 6, 2010

Status

Completed

Sector

Commercial Banking - SME Finance

Department

Regional Industry FIG LAC & EUR

Environmental Category

Previous Events

Approved : Aug 2, 2010
Signed : Dec 14, 2010
Invested : Mar 31, 2011

Project Description

Cacanska Banka ad Cacak (“CBC” or the “Bank”) has a long tradition in Western Serbia operating since 1956 as a regional bank, covering mainly Central and Western Serbia through a network of 25 organizational units in 21 towns headquartered in Cacak, an industrial center in Western Serbia. The Bank employs 396 people. It is a universal bank offering a full range of banking services to its retail and corporate/SME clients, with SMEs representing over 80% of the Bank’s portfolio. Although CBC is a small bank, it holds a leading position in servicing SMEs in Western Serbia.

The Project consists of a potential equity investment of up to 20% of CBC and senior loan facility of up to EUR7 million. It is a joint IFI effort aimed at strengthening the Bank''s capital base, and thereby improving its competitive position and enabling it to bear likely stresses on asset quality in view of the financial crisis. It is also expected to facilitate the eventual sale of the Bank to a strategic investor once normalcy returns. IFC will provide five year Senior Loan with a purpose of on lending to small and medium size enterprises, subject to the capital investment.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	9.10
Equity	11.70

Development Impact

The Project is expected to have a high development impact. It will:

- enable CBC to expand its lending to SMEs in the region that had limited access to finance from the banking sector historically and who will need more support given the effect of global crisis in Serbia. Central and Western Serbia region has a high concentration of SMEs, which play a critical role in the country''s economic growth and employment.

- strengthen the capital base and adequacy of the Bank and demonstrate the ability of a Serbian locally-owned bank to attract investments from international institutional investors in difficult financing times and thereby help the Bank to meet difficult asset quality and liquidity challenges going forward.

- will enable economic growth and job protection in less developed regions in Serbia.

- advance capacity and institution building of the Bank through the IFC''s nominee possible involvement in the Bank''s Board of Directors; and

- facilitate the eventual sale of the Bank to a strategic investor.

IFC will provide a unique countercyclical financing package together with other IFI by further strengthening Bank''s capital base, financial capacity and facilitating uninterrupted access to finance the SMEs in the frontier regions of Serbia. This will signal IFC''s confidence in the banking sector of Serbia in a joint action with other IFI in times of global economic slowdown. The project will secure capital funding to a regionally important bank in Central and Western Serbia amid lacking alternative financing during the ongoing financial turmoil. IFC''s presents and potential technical assistance will prop up Bank''s eventual goal to privatize the Bank.

For this Category FI project, IFC''s appraisal will focus on Cacanska Banka’s risk management system and capacity to perform the necessary social and environmental due diligence against the IFC Performance Standards, the applicable National Social and Environmental Laws and regulations, and the IFC Exclusion List. If required, IFC will suggest supplemental actions to address any gaps in the Bank’s risk management system and capacity. IFC will also review the Bank’s labor practices against IFC’s Performance Standard 2: Labor and Working Conditions.

Contacts

For Inquiries About the Project, Contact

Aleksandar Calovic
Vice-President of the Executive Board
Cacanska Banka ad Cacak
Pivarska 1, 32000 Cacak, Republic of Serbia

Telephone: 381-32-302 134
Fax: 381-32-302 215
Email: aco@cacanskabanka.co.rs
Website: www.cacanskabanka.co.rs

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This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

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