While Hungary and Poland have moved fast to reorganize their banks, the Czech Republic has barely started. Although foreign banks own shares in some Czech banks, none has a controlling interest. Nomura should be the first. It is in the due-diligence phase of acquiring the government's 36% of Investicni a Postovni Banka (IPB), having already built up a stake of between 15% and 20%.
The government's decision to sell its share of IPB had been expected since last year, when both ABN Amro and ING also signalled an interest. The sale of IPB, followed by one or more of the other three main banks, ought to have posed few problems. But, by the time it was announced at the end of July, events had taken a turn for the worse. Of the top four banks, all but Ceskoslovenska Obchodni Banka (CSOB) were reporting huge drops in profit of 35% or more. The combined effects of the currency crisis and the summer's floods hit domestic banks hard. The effects are expected to last well into 1998 as all will have to increase bad-loan provisioning. IPB faces other problems.