Montenegro’s troubled Atlas Banka mulls capital hike

Montenegro’s troubled Atlas Banka mulls capital hike
By bne IntelliNews January 20, 2019

Atlas Bank – one of two Montenegrin banks that had to suspend payments in December due to their poor financial condition – announced an invitation to its shareholders to subscribe for new shares worth €22mn, seeking to increase its capital and resume normal operations.

Atlas Banka and Invest Banka Montenegro (IBM) were put under temporary administration by the central bank as its audit showed that the capital of the two lenders did not comply with the minimum risk requirements. While IBM will go bankrupt, Atlas Bank decided to increase its capital and can be stabilised.

The closed share issue will be considered successful if within 35 days all 88,710 new shares have been sold.

Meanwhile, Montenegro’s prosecution has accused Atlas Banka’s head Dusko Knezevic of abuse of office. The prosecution has issued international order for his arrest and a month of detention was ruled by the court earlier in January. He has previous history of taking companies into bankruptcy, including TV Atlas in 2011 and the Meljina private hospital in 2018.

In June, central bank governor Radoje Zugic said that here were three banks where capital levels seemed risky and which should increase their capital, but did not provide details as to which institutions these were. At the time he said that they must increase their capital levels to comply with international standards and the best banking practices.

In October, Atlas Banka completed a €1.37mn capital hike, after which its capital stood at €32.03mn. The bank posted a net loss of €14.3mn through September.

The International Monetary Fund has said that the asset quality of Montenegro’s banking sector continues to improve, recovering credit growth, and high liquidity. However, the large number of banks – 15 in the country with a population of just above 620,000 people – presents a challenge for bank profitability. It has advised Montenegro to continue its efforts to improve the health of the financial sector.

Among the steps that Podgorica should take to strengthen the financial sector are asset quality reviews that would improve loan classification and provisioning practices, and adoption of a definition of non-performing loans that does not exclude impaired assets that have adequate collateral, the fund said.