KOMMERSANT. Bank Otkritie, which is part of Otkritie FC, and M2M Private Bank have showed interest in Citadele, a bank that was put up for sale, Kommersant business daily wrote on Wednesday citing several sources on the Latvian market.
“We are potentially interested in gaining retail assets in Latvia, we viewed Citadele’s assets as one of the possible takeover targets," confirmed Bank Otkritie president Mikhail Belyaev in an interview with the newspaper declining from comments. A source close to Otkritie FC told the paper that the group is mainly interested in Citadele’s retail operations.
“In Latvia Bank Otkritie plans to roll out the same segments as in Russia, i.e. retail and SME operations,“ said the newspaper’s respondent. “First and foremost, we are exploring the possibility of buying from Citadele assets involved in operations with well-off customers, but do not rule out buying the asset entirely,” noted Robert Idelson, management board chairman at M2M Private Bank. In addition, according to the newspaper’s sources, Krajbanka, a subsidiary of Lithuanian Snoras that until recently was controlled by Vladimir Antonov, placed a preliminary bid in autumn to participate in Citadele’s privatization.
Citadele was established in summer 2010 based on ‘good’ assets of Parex banka that was on the verge of bankruptcy during the 2008 crisis and was nationalized by the Latvian government. At present, a 75% — 1 share stake in Citadele is held by the Privatization Agency of Latvia and EBRD owns 25% + 1 share. In the first half of 2011 Citadele ranked sixth by assets ($2.4 bln) in Latvia, according to the Association of Commercial Banks of Latvia.
Vladimir Loginov, a representative of the Latvian Privatization Agency, did not deny interest of Russian banks in Citadele without disclosing names of specific investors or their quantity. He said that by the end of the year potential investors should place binding bids with specific offers with regard to the price and the bank’s development. “However, the bidding deadline could be revised due to the environment on the banking market in the Baltic States and the Eurozone," Loginov specified.
Despite the present problems the Latvian market, in principle, remains attractive for Russian banks as “a window to the European Union”, experts point out. “Buying a bank in a EU member state could be of interest to a Russian bank as the opportunity to raise much cheaper funds than in Russia, and this also simplifies access to the European debt market,“ noted Oleg Danilin, head of financial market consulting at Ernst & Young. “Historically Latvian banks were intermediaries, handling financial flows between CIS banks and Western institutions. Presently, the scope of money laundering in Latvia is far from the one back in the 1990s, and Latvian banking regulation is considered as the most liberal in the FSU,” Finekspertiza general director Agvan Mikaelyan specified another reason, adding this could be topical only for mid-sized investors.
Russian banks could pay a modest price to enter the Latvian market through Citadele. “For 2011 the bank released only unaudited financial numbers under the Latvian standards," said FBK expert Mikhail Korneev adding, according to these data, since the beginning of the year by October 1, 2011 the bank’s assets fell 13% to $2.25 bln and retail deposits dropped 11% to $1.8 bln.
“In view of the European picture, Latvian Citadele won’t find a buyer who is ready to pay more for the assets than its capital. Based on the 0.8 capital ratio, the bank could cost around $100 mln," Maxim Shein, chief strategist at BCS Financial Group, estimated a potential transaction price.
“Political will of the country’s government will be required to decide whether or not to allow Russian banks to solidify their threshold in Latvia," thinks Girts Rungainis, partner at Latvian investment bank Prudentia, adding that the attitude towards private investors after the Krajbanka affair has become more cautious, while major players with government capital could be politically engaged.
