Barclays Bank Pays $745mn for a Place on Russian market
MOSCOW. (Financial analyst Anatoly Gorev for RIA Novosti) - Britain's Barclays Bank has signed an agreement with Russia's Petropavlovsk Finance, the current owner of Expobank, to acquire 100% of Expobank, one of Russia's 100 largest banks.
Frits Seegers, chief executive of retail and commercial banking at Barclays, said that Expobank's existing relationships and infrastructure would provide a platform to break into the sector in Russia. He described the country as "one of the world's fastest growing economies and a market we have been keen to enter for some time."
Barclays will pay about ?373 million ($745 million) for Expobank from its own funds. The transaction coefficient (the balance between the price and the acquisition's own capital) is 4, record-high on the Russian market of mergers and acquisitions for the past 18 months.
Absolut Bank was sold to Belgium's KBC at a coefficient of 3.8, and the deal to sell a 30% stake in Rosbank to French banking group Societe Generale was closed with a coefficient of 3.3.
The average transaction coefficient as of late 2007 was 2.5, and experts say it has dwindled to 2.1 at the beginning of 2008. There are several reasons for the trend: large foreign investors have started saving money because of the liquidity crisis, there are no promising Russian banks for sale, and few buyers are ready to pay much for a second-tier bank.
Despite the relatively low rankings of Expobank, it cannot be considered a second-tier bank, above all because it has been consistently increasing its share on the retail banking market. According to the May 2007 ranking prepared by the RosBusinessConsulting (RBC) news agency, Expobank was one of the 10 most dynamically growing banks in 2003-2007. RBC also ranked it 23rd best deposit bank in the first quarter of 2007.
The bank's other strong points are a broad network of branch offices and a huge number of ATMs in Moscow.
Marc Van der Plas, head of corporate finance at the international auditor KPMG, said that had made Expobank a highly attractive acquisition.
Its position is unique for a medium-range bank, because of its place on the market of credit and debit cards and its success potential. At the same time, its focus on small and medium-sized companies and its regional and clients base make it very attractive for growth on the rising Russian market of banking services, the KPMG official said.
Barclays has bought Expobank not only because of its exceptional advantages. The U.K. bank made its first attempt to get a foothold on the Russian market before the 1998 financial crisis, which stopped Barclays in its tracks.
The decision saved it from losses, but now it will have to start from scratch, unlike long-livers on the Russian market such as Raiffeisenbank and Societe Generale. Barclays is starting its Russian business when its rivals have skimmed the milk and individual borrowing rates are falling.
Starting a greenfield project can cost Barclays a lot now that the world's largest financial structures have to be more thrifty and calculating.
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