The official website of the Bank of Russia posted a document entitled “Information Notice on the Bank of Russia’s Acceptance of Messages from Interested Parties of Intention to Participate in the Procedures for the Sale of Shares of PJSC Bank FC Otkritie”.
Basically, the Public Joint Stock Company Bank “Financial Corporation Otkritie” is up for sale. However, it has been difficult to find a buyer for over a year. What is wrong with Otkritie Bank, and why is the Central Bank unable to find a buyer for it?
The bank has a rich history, formed from the merger of more than 10 banks, including Khanty-Mansiysk Bank (KhMB Otkritie), Petrocommerce Bank, Novosibirsk Municipal Bank, Sverdlovsk Provincial bank, investment bank Otkritie (IA Otkritie), Russian Development Bank, Binbank, Absolut Bank and Rosgosstrakh Bank, as well as partial assets of Trust Bank, and more. This integration took place under the Otkritie Holding financial group from 2000 to 2010.
In 2017, the bank came entirely under the control of the Central Bank of the Russian Federation.
This was followed by measures to financially recover FC Otkritie.
It's worth noting that in 2017, a mechanism for financial recovery or rehabilitation was introduced with the involvement of the Bank of Russia. This involves providing financial assistance by the Central Bank to banks and other credit organizations, including through the acquisition of shares, concessional loans, and other measures.
We can only guess at the principle and recipients of the assistance provided by the Central Bank. However, it is known that the following are currently being reorganized with the participation of the Central Bank:
– Joint Stock Company “Moscow Industrial Bank” (Reg. No. 912)
– Public Joint Stock Company Promsvyazbank (Reg. No. 3251)
– Public Joint Stock Company National Bank TRUST (Reg. No. 3279)
Returning to Otkritie bank, on August 29, 2017, the Central Bank of Russia issues Order No. OD-2469 “On the Appointment of an Interim Administration for the Management of the Credit Institution Public Joint Stock Company Bank Otkrytie Financial Corporation, Moscow”. On August 30, a temporary administration was formed from 34 Central Bank officials under the leadership of Dmitry Sergeevich Pozhidaev, Deputy Director of the Financial Recovery Department of the Bank of Russia.
On December 21 of the same year, the temporary administration ceased its activities and the bank began to be considered “recovered”.
Then, on August 03, 2021, an Information Message appears discussin the Bank of Russia receiving messages of intent from interested parties to take part in the sale of shares of PJSC Bank FC Otkritie.
The document states the subject of a potential sale:
“This involves at least 50% of the total shares of the Bank plus one ordinary registered uncertificated share of the Bank (state registration number of securities: No. 10202209B dated November 30, 2017, with a par value of 1/220,421,642 rubles each).
The Bank of Russia expects to sell at least 50% plus one share to a strategic investor.
The Central Bank planned to sell the bank before the end of 2021, as stated in the same information message. However, the deal has not happened yet. The media leaked information about two likely contenders for the purchase of FC Otkritie – Gazprombank and the Region-Rossium group, led by Russian businessman Sergey Sudarikov. It is important to note that in 2020 Region acquired a significant stake in the Moscow Credit Bank (MKB).
Will Mr. Sudarikov also need Otkritie? The question remains!
According to sources from Kommersant:
The buyers of the blocking stake may be the structures of one of the largest businessmen who does not have his own financial business.
However, Gazprombank, which lacks its own financial business, and “Region” joined the ICB. In light of this, the Central Bank does not rule out the possibility of selling shares through an IPO (Initial Public Offering) – an initial public offering, which experts believe is completely undesirable for the regulator.
Having spent no less than 0.5 trillion rubles on the reorganization of FC Otkritie, the Central Bank expects to find a truly solid strategic investor who will recoup the money spent.
We just need to wait for the buyer. If one does not appear in an evolutionary way, it may turn out that he will simply be appointed.
According to our expert, a top manager of one of the leading banks in the Russian market, this venture will not succeed, at least in the foreseeable future:
“Considering the complexities of our economy, it is obvious that the sale of Otkritie Bank can, on the one hand, help replenish the budget if the sale is to a private investor. On the other hand, this may help stimulate market mechanisms in the banking sector. But since 80% of the banking sector in our country is state-owned, I doubt that this sale will strongly stimulate anyone. Of course, the Central Bank wants to sell Otkritie soon. But we know they’ve been trying to sell state-owned banks for a long time. For example, the Asia-Pacific Bank of the Central Bank was sold 3 years after the announcement in 2021 to a Kazakh investor for 14 billion rubles. This was with the bank’s own capital at the time of the sale of 18.8 billion rubles, according to the semi-annual report.
“Opening” is a huge structure. For sale – not for sale … The question of price. Generally, we can say that there are no real interests in the current reality, if they are not people involved, so to speak, by the system. Large banks are sold with great difficulty and may be of interest to a foreign investor or a large industrial group … But now, in the current realities, it is unlikely that anyone will spend money on their own bank, especially of such a size. Rather, they will acquire a small bank and develop it according to their own needs…
Many investors have had unsuccessful projects. At some point, a phrase is said. Let’s try to at least recover the nested. In 2021, the Central Bank was willing to sell both a controlling stake for 250 billion and a quarter. The deal has already been arranged with someone. There are quite specific steps being considered, suggesting that some parts of Otkritie Bank may be separated and sold individually to the buyer.
The Central Bank's message states: “Depending on the interest of strategic investors, it may also be considered to separate the insurance business and (or) pension business from the banking group before the sale of the Bank’s shares”
Such transactions are often approved in advance in high-level offices. Here we see that the offer has been lingering on the market for a long time. Public statements are reminiscent of an anecdote, suggesting that the rabbi’s parrot at the border was ready to return to the promised land “at least as a carcass, at least as a stuffed one.”
Let’s state the conclusions as contrastingly as possible:
1. The stated price does not match the bank. The price is determined by the funds spent on restoring the bank. This means that the Central Bank should be questioned – has the owner, who has invested citizens' funds in this bank, spent effectively?
2. The market is not well-developed. It is dominated by the largest bank in many segments. State-owned banks do not promote competition. Such markets will not encourage investors to seek investment. As the regulator of this market, the Central Bank can be reproached for the current situation.
At various times, the market also discussed GPB as the main buyer. Sberbank's German Gref and Elvira Nabiullina wanted to persuade him to hold the asset for a while. The departure of the former deputy head of the retail block of FC Otkritie bank Alexander Pakhomov, in January 2022, as the Chairman of the Board of Post Bank also raised the question – could these two quasi-state banks arrange pseudo-competition for other state-owned banks? But regardless, potential buyers for this asset have been waiting for almost a year.
A growing market could hide the ugly wrinkles and prop up the withered balloons in our market. In a different situation, one could rely on foreign capital, or on a major lobbyist. But history does not permit the subjunctive mood. The situation highlighted two existing problems. With existing buyers, no one is willing to pay in rubles for the quality of the assets of Otkritie Bank. This time it will be difficult for Elvira Nabiulina to keep a good face on a bad game.
