Sofia Municipal Council chose on April 11 the consortium Argyle, Kamburov, Transacta, Moore Stephens, BulMarFrench as the consultant for the privatisation of 74 per cent of the shares of Municipal Bank (MB).

Sofia Municipal Privatisation Agency (SMPA) chief executive director Ivan Dimitrov is expected to offer a contract to the winner shortly. The consortium was chosen ahead of four other candidates and will be required to prepare a strategy for the privatisation of Sofia municipality’s stake in MB within two months, SMPA chairman Svetlin Lisichkov said.

Argyle & Associes Banque specialises in mergers and acquisitions, the creation of new financial products and internet industry investments. Argyle & Associes Banque is a serious investment bank and will do the job for which it had been selected, municipal councillor Vladimir Karolev said, as reported by Bulgarian-language daily Pari.

The municipal stake sell-out of at least 67 per cent is expected to take place by the end of 2007.

The remaining part of the shares is held by private firms, some of them with minority participation by municipal entities. Local businessman Hristo Kovachki holds a blocking quota of 25 per cent in MB that could become a serious impediment to its successful privatisation, IntelliNews reported on April 16.

After the collapse of the local banking sector in 1996, Municipal Bank was set up to safeguard the financial stability of the municipalities it serves. In March 1996, Bulgarian National Bank (BNB) licensed MB for domestic operations with a capital of 450 million leva.

At the beginning, Sofia municipality was the main shareholder in the bank, holding 97.12 per cent of its capital, while the remainder was distributed among 20-odd municipal firms.

BNB granted a full banking licence to Municipal Bank for operations inside the country and abroad after the bank increased its paid-in capital to 2.36 billion leva in April 1997.

MB’s capital was raised from 805 million leva through a transfer of the 1996 net profit of 411 million leva into the share capital and a new share issue covering the remainder.

After the capital hike, Sofia municipality held about 63 per cent in the capital with the rest controlled seventeen municipal companies.
In January 2005, Sofia Municipal Council decided to sell its entire 80.5 per cent stake to a strategic investor.

However, the exact amount of the slated stake is not clear since Sofia’s stake in the bank has fallen to 72 per cent after several municipal companies sold their equity in late 2004.

Irish-based Depfa Bank, French-Belgian Dexia Bank and the European Bank for Reconstruction and Development (EBRD) have expressed interest in buying the city-owned stake.

In June 2005, the heavyweight in the local energy industry Kovachki purchased almost 26 per cent of the bank buying out the stakes of the private shareholders through 11 of his companies.

MB currently has 17 branches and 27 representation offices nationwide, and managed assets of 238 million euro as of the end of 2005. MB 2006 revenue was 39 105 000 leva and the net profit of the bank for the past year was 3 478 000 leva.