It is understood that the consortium will seek in the coming weeks to buy a further stake in BS, Tunisia's seventh largest bank, in order to establish a majority interest. The deal would involve the consortium buying the 17 per cent share in BS held until recently by Banca Monte dei Paschi di Siena.

The Italian bank's stake was in August acquired by a local private investor for about $40 million, at a price of TD 7.5 ($5.6) a share. The investor is understood to have reached agreement with the Santander/Wafa consortium to sell the shares for at least TD 9 each. The transaction is expected to be completed by early 2006 (MEED 9:9:05).

The BS sale will be well received by the World Bank, which is looking for Tunis to reduce its stake in the banking sector - currently about 55 per cent - to below 50 per cent by the end of the year.

It is the second instance of international investors taking a strategic stake in a local bank. Societe Generale in late 2002 acquired a 52 per cent interest in state-owned Union Internationales des Banques (UIB). An attempt in 2002 to sell the government's stake in BS failed to attract interest from international investors.

As with the SocGen purchase, it is understood that the international consortium, which will take management control of BS, will be able to operate the bank at zero profit, in order to divert resources towards provisioning for non-performing loans.

The bank lacks provisioning for more than two thirds of its paid-up capital of about TD 150 million ($111 million).