Banks, Financial Services, Investments, Latvia

"It cannot be said that an organization where reorganization and reform is constantly taking place could quickly and effectively recommence lending and suddenly in one night acquire a second wind. This is highly unlikely," said the investment banker, in whose opinion Citadele banka's influence on the financial market in Latvian will be minimal, and the bank will not succeed in regaining the former strength of Parex banka. "I do not expect any miracles from Citadele banka", admitted Rungainis.

However, he sees the creation of the new bank as a positive step, which will increase the bank's value and, correspondingly, the state's chances of recovering the resources invested in Parex banka; however, in Rungainis' view, it is still impossible to talk about the state managing to recover the full investment of over LVL 800 million.

"The full value of Parex banka was destroyed during the bank's period of 'de facto' bankruptcy and the takeover process. Now a battle is taking place so that the state can recover at least part of its investment. Of course, miracles do happen, but at present it would be more appropriate to speak of how much the state will lose. This will be hundreds of millions, but it is still impossible to say when and exactly how much," indicated the investment banker. He also allowed that the state could also exit the situation without losses if devaluation of the lat took place.

In Rungainis' view, with the creation of Citadele banka, the banking sector in Latvia has acquired a new middle-sized bank, which in terms of rankings will join the top ten, but will definitely be in a lower position that Parex banka was before the takeover. "It is clear that the new bank will be much smaller than Parex was as a whole. Both due to the fact that the bad part has been detached, and also to the fact that clients have left, do not use the bank and in the near future will not use it as their main bank," said Rungainis, indicating that non-residents will not find the bank attractive either.

He allowed that in its operations, management and decision making, Citadele banka could be similar to Hipoteku banka, which is also under state control.

The investment banker believes that the development and progress of the newly-created bank will be possible only after it comes under the control of a new owner; however, then the new bank will most likely experience even more changes.

Rungainis is skeptical over the management team for Citadele banka, indicating that he sees no leaders among the group who are capable of moving the bank forward. "The bank is basically without leadership. All respect to [Citadele banka CEO Juris] Jakobsons, but the bank needs aggressive, innovative and visionary leaders and management, but there are no such people there now, and I do not see that in the near future such people could appear there, as, first of all, the state is not ready to pay the amounts which must be paid to this kind of leader; moreover, no good manager would come to work just for a couple of months, as in this time it is not possible to make a career or fully express how you work, as the bank will be sold anyway," indicated the investment banker.