Belgium's KBC on Wednesday became the latest foreign group to grab a slice of Russia's booming lending market, buying second-tier mortgage specialist Absolut Bank for $1 billion.
Absolut Bank chairman Nikolai Sidorov said he had signed a deal selling 92.5 percent of the bank's shares. „The deal amounts to $1 billion, which is unprecedented in the Russia market,” Sidorov said, adding that the bank was now in a position to pursue regional expansion and develop its retail business. KBC said the deal, worth €762 million ($1.03 billion), requires Russian regulatory approval and is set to take place in the third quarter of the year.
Absolut is ranked the country's 25th-biggest bank with assets of $2.52 billion as of the end of December. The deal follows Russian acquisitions last year by France's Societe Generale, Austria's Raiffeisen, Hungary's OTP and Germany's Commerzbank. In a statement, KBC described Absolut as a „mid-sized, independent, universal bank ... with total assets of €1.8 billion ($2.45 billion) and total equity of around €200 million in Q1 2007.” It said Absolut Bank had more than 1,600 employees and 39 branches. Absolut chairman Alexander Svetakov owns 51.6% of the bank and the World Bank-affiliate International Financial Corporation owns another 7.5%. Four individuals own the rest. The IFC is considering whether to sell its minority stake to KBC.
Clinching the deal, however, could yet present some difficulties, said Larisa Metyashova, head of the legal department at the Association of Russian Banks. „Bank takeovers are not so simple in Russia. There are lots of legal hurdles to overcome before the final takeover agreement is sealed,” Metyashova said. The most difficult hurdle, Metyashova said, is Central Bank Instruction 109, a tangled cobweb of drawn-out procedures that foreign investors must follow before they can buy a Russian bank. „Absolut Bank is a well-groomed average bank that has attracted attention chiefly because of its aggressive mortgage lending,” said Natalya Orlova, a senior analyst with Alfa Bank. „Absolut Bank is the investors' darling because of its focus on the retail market.” Last week, Absolut deputy chairman Oleg Skvortsov announced plans to close a deal to securities $500 million in mortgage and car loans in late 2007 or early 2008. David Nangle, an analyst at Renaissance Capital, described the deal as „a logical move for a strategic investor that is experienced in emerging markets.”
„KBC group already has a sizable presence in many eastern European countries such as Hungary, Poland and the Czech Republic and their foray into Russia will cement this expansionist trend,” Nangle said (themoscowtimes.com)