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12 Nov 2012

New kids in the banking block

Mergers and acquisitions in banking

In the following six months in the Belarusian banking sector, several credit institutions will merge, while others find new owners. Currently, very likely that Alfa Bank will buy Belrosbank.

"Every week, representatives of the Moscow office of Alfa-Bank are in Minsk, doing  something like due diligence of Belrosbank. They said they will close a deal in the end of the year" - a source close to the management of Alfa Bank said. On his opinion, Rosbank for long time wanted to get rid of assets in Belarus under the pressure of the main shareholder of French’s Societe Generale.

Another source, close to process of the negotiations, confirmed that "the deal is in the high stage of readiness." He suggested that the "initial price will be low." "SocGen is now experiencing difficulties in Europe" - he argued the purchase price.

The fact that the largest private financial group in Russia to buy another bank in Belarus, said recently the chairman of the Board of Directors of Alfa-Bank Petr Aven. In early September, he visited Minsk and met with Prime Minister Mikhail Myasnikovich. "However, at first Alpha Bank wanted to purchase Belinvestbank. They want to grow in Belarus, it is necessary to expand. Excellent opportunity to grow - to absorb the third state bank in this country," - the source in banking circles said.

It is worth noting that the National Bank has repeatedly said that he intends to sell Belinvestbank to one of the leading Western banks to diversify assets. Currently there is dis balance  six of the top ten banks have Russian owners, three banks are state-owned and only Priorbank has  western roots. "This time the issue was discussed even at the highest level. But proposal of Alfa Banl to buy Belinvenst bank has been rejected. Instead they was offered to buy a small state Paritetbank. However, this option does not satisfy Moscow. So, apparently, it was decided to purchase Belrosbank," - the source said.

Alfa-Bank has been working in Belarus for 4 years, once it bought Mezhtorgbank in 2008. "For the time that we are here, we have grown in assets by 11 times, the loan portfolio by 15 times, in deposits by 6.5 times," - Pyotr Aven, chairman of Alfa Bank, said during a meeting with Mikhail Myasnikovich

Alfa-Bank and Belrosbank,  by assets, are on the 11th and 12th places respectively of 32 banks of Belarus. Acquisition  of Belrosbank wil help Alfa Bank to rank among the top ten banks in Belarus.

Alfa-Bank and Rosbank refused to comment on the possible merger.

Involvement of VTB

One obstacle to merger of Alfa Bank with Belinvestbank could be the desire of Belarus  government to buy from VTB  the Bank Moscow-Minsk and then add it to Belinvestbank.

The story to bring  almost 100% share of the Russian VTB Group  in VTB Bank Belarus goes on almost a year. Buy-out of shares of the state did not succeed. The parties can not reach a compromise. The problem  - The Moscow-Minsk Bank, which is owned by VTB Group, which has declared his strategy intention to sell  the foreign "daughters" of the Bank of Moscow.

The Belarusian side, represented by the National Bank, is interested in merging the Bank Moscow-Minsk to Belinvestbank. Thus the state bank would be in better shape by the time of the sale. Previously it was assumed that the state may exchange its stake in VTB Bank (Belarus) for shares of the Bank Moscow-Minsk, to integrate the latter to Belinvestbank. VTB Russia believes  that these two transactions should take place separately. The Belarusian National Bank does not agree. "The price for the purchase of government stake in VTB Bank (Belarus) has been agreed, the parties have reached a consensus on this issue, and then developed mechanism of action," - said a source in banking circles. According to him, "main issues  are development projects of Bank Moscow-Minsk". NBB (National Bank of Belarus) wants them first to structure their business."

Iranians to decide

Yet another real contender for mergers and acquisitions - two banks with Iranian capital. The “Torgovyj capital” Bank (TC Bank) and Onerbanka are under sanctions the U.S. government. Also in August of this year, National Bank for 1 year suspended license of TC Bank in the implementation of certain banking operations, including deposits. Experts have suggested that the regulator revoked the licenses of TC Bank because its parent Bank Tejarat (one of the largest financial institutions in the Islamic Republic of Iran and the Middle East) is under international sanctions. A source in the main bank of the country believes that "the reason is not only that, but also in the fact that in recent TC Bank acquired the characteristics of the investment company, not the bank."

Rumors on sale of business increased after a number of employees of the Bank of TC did not renew their contracts. The credit organization stated that " the bank worked and continues to work steadily," and decline to comment further. According to a source in banking circles, the Iranian TC Bank shareholders are thinking of what to do with their Belarusian "daughter." "It is stupid to keep the frozen money. But the East - a delicate matter, you know," - he concluded.

SME banking

Another contender for the sale of the banking business - Credexbank which the U.S. Treasury recently called the "key center of global money laundering." Although seemingly as information about special willful violation has not been confirmed, but the sediment remained. According to a source in banking circles, "now shareholders [Credexbank] looking for a buyer and intend to focus on its other businesses, particularly in the construction." "As shown with the rebranding of the Info Bank into Trust Bank, the best option in such stories - the sale of the business," - he said.

According to a source, "all the banks in the third ten [by assets] anyway considering combining with other banks or attracting strategic investors." Recently, the President of the Board of Eurobank, which is owned by the owners of the Trade House "Zhdanovichi" Michael Provorov announced the search for an investor who would have helped the bank to develop.

Consolidation of the banking sector is the main aim of the National Bank of Belarus, which raised the capital requirements for commercial banks. Thus, the banks who wish to work with deposits need to raise funds to up to 25 million euros. But do not forget that as a result of devaluation bank capital is impaired. National Bank is not ready to reduce its demands of prudential nature. Commercial banks' capital gains in the current year are barely noticeable. Therefore, the question of unification banks to increase capital at the present time is very essential.  Otherwise they can get stuck in their development.


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