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Awards for Excellence 2016
Thanks to high levels of foreign ownership, banking sectors in CEE saw few sizeable failures during the financial crisis. Latvia’s Parex Banka was the exception. Locally owned and heavily dependent on wholesale funding, it suffered a run on deposits after the collapse of Lehman Brothers and had to be bailed out by the state. Large portfolios of bad debts were subsequently hived off into a bad bank and the relatively healthy rump was reborn as Citadele Banka in March 2010, which is the winner of this year’s best bank transformation award for CEE.
The new lender has come a long way since 2010. Parex’s higher-risk business lines and foreign clients were abandoned in favour of a more domestically focused strategy, with the emphasis on retail and SME customers. As the Latvian economy recovered, the strategy paid off. By 2012, Citadele was back in the black, and two years later the bank passed another milestone when it was bought by a consortium of heavyweight global investors – including Paul Volcker and Nassef Sawiris – led by former private equity fund Ripplewood.
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Guntis Belavskis, Citadele |
With privatization came the lifting of restrictions on growth and other metrics set by the European Commission as part of the bailout package, allowing Citadele – under new chief executive Guntis Belavskis – to pursue a more aggressive expansion strategy. Lending growth last year topped 9%, plans for a pan-Baltic bank have been revived and December saw the launch of a new microfinance business. A planned IPO in the autumn failed to attract sufficient support however. This was generally attributed to wider market nerves and investor concerns over lack of liquidity, rather than concerns about Citadele itself. Despite a small drop in net profit, the bank’s return on equity – excluding one-off costs around the IPO – came in at a healthy 15.5% for 2015.
Restructured, recapitalized and regenerated, Citadele today is almost unrecognizable as the failed lender that was left after Parex’s spectacular implosion and is well-positioned to serve Latvia’s economic recovery.