EUROPE – Russia’s Blagosotoyanie railway workers’ pension fund has emerged as the frontrunner to acquire Absolut Bank from Belgian banking group KBC, local experts believe.
Russian media reported at the end of November that Blagosotoyanie had been in talks with KBC over the sale of the bank.
Contacted by IPE, a spokeswoman at KBC confirmed that the divestment process for Absolut Bank was “ongoing”.
“However,” she said, “since we are banned by strict confidentiality, we cannot provide details about the process, the names of the interested parties, the offers or any other financial details as long as the process is ongoing.”
Evgeny Yakushev, founder of Pension & Actuarial Consulting in Russia, told IPE that Blagosotoyanie would likely acquire Absolut Bank at a deep discount and then divest its investment after several years.
“It’s a pure financial investment,” Yakushev said. “They could also use this bank to finance some projects together with the pension fund. For instance, they could sell some kind of bank insurance to the pension scheme’s contributors.”
However, Olga Logvina, head of research at Sberbank, said the attractiveness of the deal would depend on the price, which has not yet been disclosed.
“KBC paid $1bn (€765m) for the bank in 2007, valuing it at four times the price to book value (P/BV),” she said. “Russian banks now trade on average at 0.9 P/BV, so it is difficult to imagine the price higher than one book.”
Logvina went on to say that several large Russian pension funds had enough reserves to make such acquisitions.
Blagosotoyanie’s total assets were estimated at RUB237.7bn (€5.9bn) as of April this year, while the size of its pension savings were valued at RUB67bn and the size of its pension reserves up to RUB160.7bn, according to the Russian Federal Service on the Financial Markets (FSFM).
“On average,” Logvina said, “banks are rather cheap across the globe, so long-term institutional investors can enter such deals.
“One Russian banker [Igor Kim] offered to buy it at 0.5 P/BV earlier this year, but he finally pulled out of the deal since banks normally do not pay the multiples, which are higher than the ones they themselves trade on.”
KBC has been rumoured to be looking to sell its shares in Absolut Bank since 2009.
At the time, numerous media reports claimed that KBC Group was seeking to offload Absolut Bank only two years after acquiring its Russian assets for $1bn.
However, in April 2011, KBC Bank acquired part of the International Finance Corporation (IFC)’s stake in Absolut Bank.
Under the agreement, the private sector arm of the World Bank Group, IFC, sold part of its 5% stake in Absolut Bank to KBC Bank for a total consideration of $66.8m.
Following the deal, KBC held a 99% stake in the Russian bank, while IFC maintained a 1% share.
The sell of Absolut Bank is part of KBC’s plans to pay back almost €7bn of state financial support received during the financial crisis.