THE SECOND SHARE CAPITAL INCREASE THIS YEAR A new capital infusion of almost 150 million Euros in BCR

• The proposal to increase the share capital of the bank comes as SIFs are divided

On November 14th, the shareholders of BCR will be summoned to decide on a new capital injection, after having voted in favor of raising the bank"s capital by about 55 million lei this spring, by incorporating the net profit of 2010. This time, the executive committee of BCR has proposed the capitalization of the bank by 644 million lei (about 150 million Euros), by issuing 6.18 billion new shares, with a face value of 0.1 lei/share.

In the beginning of this week, Andreas Treichl, the CEO of "Erste", said that BCR would see a share capital increase with cash, by the end of the year. The statement came on the same day that "Erste" announced a series of extraordinary measures, which include writing down the value of its stake in BCR by 700 million Euros, to 1.1 billion Euros.

The officials of "Erste" have recently said that the share capital increase is intended first and foremost to maintain an optimal ratio of non-performing loans.

In order to keep its current stake, "Erste", which controls about 70% of BCR, would have to inject about 450 million lei (105 million Euros), while the Financial Investment Companies (SIFs), which together own about 30%, would be required to contribute 193 million lei (45 million Euros - 9 million Euros for each SIF).

The proposal to increase the share capital of BCR comes as the SIFs are divided.

Four of them (Muntenia, Banat-Crişana, Transilvania and Oltenia) signed a principle agreement with "Erste" to sell their stakes in BCR, in exchange for shares and EBS shares, but only two of them (Muntenia and Oltenia) held their General Shareholder Meetings to discuss the issue, and received a mandate from shareholders to negotiate the sale of BCR. (The mandates for negotiations which the two SIFs received will expire in a few days).

SIF "Transilvania" has a General Shareholder Meeting scheduled for the end of this month, and SIF "Banat -Crişana" has scheduled its own on November 3rd, with both set to discuss the issue of their respective stakes in BCR. The two General Shareholder Meetings will take place a few days before the General Shareholder Meeting of BCR discussing the increase of the bank"s share capital.

SIF "Moldova", the only SIF which did not sign the Principle Agreement with "Erste", has already held its own General Shareholder Meeting, and the shareholders have already decided to empower management to negotiate first and foremost the beginning of the steps needed to take BCR public, and secondly, to negotiate alternative solutions for liquidizing the company"s stake in BCR, if taking the bank public is not an option. The mandate of SIF Moldova to request the listing of BCR will expire at the end of this month.

"First of all, we need to see the decision of the shareholders of SIF Banat Crişana", said Ioan Cuzman, the chairman of SIF "Banat-Crişana". He went on to add: "If the shareholders do not approve the Meeting, we will see what other options we have. In terms of resources, it wouldn"t be a problem to participate with nine million Euros in the share capital increase of BCR, but I don"t know if that would be an option".

Costel Ceocea, the president of SIF "Moldova", said that, if the holding cap in the SIFs had been 5%, instead of the current 1%, he might have considered summoning the General Shareholder Meeting of the SIF to raise money for participating in the share capital increase. For now however, Mr. Ceocea says that SIF2 has not yet made a decision on the share capital increase of BCR. He said: "I can"t tell you whether we are going to participate in the share capital increase or not, if we are going to let our stake be diluted or if we are going to sell. For now the mandate given to us by our shareholders is still in effect, so we can still request that BCR begin the procedure to take the bank public, even though we run the risk of finding that the two conditions for requesting the listing can not be met. That still leaves the mandate to negotiate the sale ... Theoretically, finding the funds needed to participate in the share capital increase in BCR is possible, but in such an economic context the priority of the company"s management is to ensure the financial stability of the SIF".

The management of SIF "Transilvania" (SIF3) is also waiting for a response from its shareholders, but until then, the directors of the company are going to meet and review the situation created by the announcement of the intended share capital increase of BCR, one official of the company said.

Tudor Ciurezu, the Chairman of the Board and the General Manager of SIF Oltenia, said: "On principle we are agreed to see the materials which will be presented in the General Shareholder Meeting. As long as Trichet (ed. note: former president of the European Central Bank) says that banks need recapitalization), what can we say? The proposal came from the management of the bank. Their intention to perform a share capital increase was visible since the previous meetings with them, when the SIFs were negotiating the sale of their stakes in BCR".

The President of the Board of Directors and the General Manager of SIF Moldova (SIF2), Costel Ceocea, also said that the share capital increase was proposed after consultations between the management of BCR and that of Erste. He added: "The executive committee of BCR has summoned this General Shareholder meeting, but they have most certainly previously talked to Erste, nothing is accidental. This situation was expected, coming from all the statements made by Erste, and by the NBR, which says that by the end of the year steps will be taken to strengthen the Romanian banking system. This share capital increase, as stated in the notice to attend, is determined by the macroeconomic situation, the outlook of the financial banking system and fits in with the vision of the NBR. We have also seen the positions of the German chancellor and of the French president, as well as the communiqué issued by Erste on Monday. All these factors prove that there was a need for a share capital increase, but I don"t know how we are going to vote on it".

The chairman of SIF 5, Mr. Tudor Ciurezu, does not rule out the possibility of Erste raising its stake in BCR to more than 75%, which would allow it to make all the major decisions by itself, if the SIFs do not contribute the amounts needed to keep their stakes from being diluted. According to the bank"s articles of incorporation, quoted by Mediafax, the major decisions such as share capital increases may only be made with 75% of the votes. At the moment, the SIFs hold 30.11% together, but four of them have signed the agreement with Erste to sell their stakes to the Austrian banking group.

Tudor Ciurezu said: "Each SIF would have to come up with their own cash to keep their stakes intact. We will see how much we are going to contribute by December 15th-December 16th, when the share capital increase ends. Perhaps by then we will have already sold some of our shares in BCR and we will need less money to participate in the capital increase. The latter is needed because of the economic conditions in Romania. If there is stagnation, if the economic growth is tepid, companies and customers may not have the money to pay their loans and then it comes to rescheduling and postponing loan payments. In such an event, the bank would need money".

The agenda of the General Shareholder Meeting of BCR also includes the proposal to allow shareholders to exercise their pre-emption right for subscribing the newly issued shares, starting on the date of the General Shareholder Meeting of BCR and ending one month after the publication of the decision in the Official Gazette.