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Thu 16 Aug 2012 03:31 PM

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Omani investor takes 25% in Bulgaria's Investbank

Banking in Bulgaria has lagged behind swift development of lenders elsewhere in eastern Europe

Omani investor takes 25% in Bulgaria's Investbank

The CEO of Oman's Shanfari Group of Companies has stepped in to bail out Bulgaria's Investbank, buying a 25 percent stake in the lender in return for BGN50m (US$31.50m) in a deal approved on Wednesday.

Bulgaria's central bank had asked Investbank, majority controlled by local company Festa Holding, to boost its capital by BGN50m to ensure its proper operation as the quality of its assets worsened.

Banking in Bulgaria, the EU's poorest country by income per head, has lagged behind swift development of lenders elsewhere in eastern Europe which has generated huge profits for Italy's Unicredit and Austria's Raiffeisen among others.

The room for development that remains in the sector means mid-sized lenders are often attractive propositions. The deal gave Adil Said al Shanfari, CEO and vice president of the Omani group, a minority stake in the bank.

"The central bank allowed al Shanfari to acquire 29.76m shares in the bank, which will increase its capital by 24.93 percent," Deputy Governor Rumen Simeonov said.

"With this, the bank meets the requirements of the central bank's supervision for the time being," he said.

The central bank's approval finalises the deal, as the funds were transferred two months ago, Simeonov said. Festa Holding continues to hold a majority stake in Investbank, he added.

The Shanfari Group of Companies are active in tourism, infrastructure, automotives, metal industry and oil and gas.

The bank, with assets worth BGN1.29bn, saw its net loss more than double on an annual basis at the end of June to BGN16.5m, mainly due to a rise in provisions, central bank data showed.

Bad loans have been rising since the global crisis hit the Balkan country in 2009, putting a brake on strong economic expansion and deflating a real estate and construction boom. In the second quarter, they reached 16.9 percent of total credit.

The central bank says that despite that spike, the Bulgarian banking system as a whole is profitable and in good health with a capital adequacy of 16.7 percent, above its threshold of 12 percent.

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