Bargain of the Week? Russia’s VEB to Buy Svyaz Bank for $192

Russia’s state-owned Vnesheconombank (VEB) said Wednesday it had struck a deal to buy a 98% stake in troubled Svyaz Bank for the symbolic sum of 5,000 rubles (about $192).

“We will soon become the principal shareholder of Svyaz Bank,” VEB chairman Vladimir Dmitriyev said. “At the final stage of negotiations with current shareholders we have agreed on a symbolic sum of 5,000 rubles in return for 98% of the bank’s stock.”

Russia’s Federal Anti-Monopoly Service has already approved the takeover, he said.

However, the Central Bank has yet to sign off on the deal.

Dmitriyev said less than a quarter of Svyaz Bank’s 90 billion ruble ($3.5 billion) loan portfolio was seen as high-risk, mostly corporate loans.

This is the first big bailout involving a retail bank since the Russian financial sector was hit by the global credit crunch.

Svyaz Bank, which has 49 branches across Russia, was downgraded by Moody’s on long-term global local and foreign currency deposit ratings from B2 to Caa2 and on its bank financial strength rating from E+ to E.

The Russian government said in late September it would lend Svyaz Bank $2.5 billion to stabilize the struggling lender and enable it to meet its obligations.

Analysts say problems with liquidity experienced by the Russian banking sector could trigger a wave of consolidations, and reduce the number of lending institutions in Russia by a third.

Source RIA Novosti

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