March 24 (SeeNews) - Bulgaria's central bank said on Friday it declined to grant a preliminary approval to the request of Sofia-based D Commerce Bank to acquire 100% of local Victoria Commercial Bank, saying the proposed strategy for the acquisition and business development of Victoria pose 'considerable risks'.
D Bank is financially stable and meets the regulatory and supervisory requirements but the proposed plan for the development of Victoria Bank as a separate institution rather than through its merger into D Bank would be unable to ensure the financial stabilisation of Victoria Bank in the long term and the creation of a sustainable model of business management, the Bulgarian National Bank (BNB) said in a statement.
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In addition, the proposed strategy for the takeover and development of Victoria Bank would require a permanent capital and liquidity support from D Bank, which could undermine D Bank's financial stability in the long run, BNB added.
In October 2016, Victoria Bank said that Sofia-based Bulgarian American Credit Bank (BACB) and D Commerce Bank have been invited to submit non-binding offers in the second phase of the purchase procedure. In the first phase of the process eight potential buyers expressed interest in the purchase of Victoria Bank, including BACB and D Bank.
Victoria Bank recorded a net loss of 5.6 million levs ($3.1 million /2.9 million euro) in 2016, compared to a loss of 9.3 million levs a year earlier. Its total assets stood at 128.5 million levs at end-2016.
D Bank recorded a net profit of 846,000 levs in 2016, compared to a profit of 572,000 levs a year earlier. Its total assets increased to 725.9 million levs at end-2016, from 672.2 million levs at end-2015.
In June 2014 Corporate Commercial Bank (Corpbank) finalised the purchase of Credit Agricole's local unit and renamed it to Victoria Commercial Bank. However, later that month Corpbank was hit by a run on deposits, prompting the BNB to place it and Victoria Bank under conservatorship, suspending all payments.
In November 2014 the central bank made a mandatory prescription to the conservators of Victoria to start a procedure for the sale of part of the credit portfolio of the bank to local lenders Tokuda Bank, Societe Generale Expressbank, and Central Cooperative Bank (CCB) for a combined 180 million levs, which would be enough to repay deposits - both secured and unsecured - worth a total of 160 million levs.
The period of BNB's special supervision over Victoria Bank expired at the end of 2014. Corpbank was declared insolvent in April 2015.
(1 euro = 1.95583 levs)