Shareholders of RosEvroBank are negotiating on its sale. Foreign investors are also insterested in acquisition. In November 2016 representatives of the majority shareholders met with potential buyers, but because shareholders estimate the cost the Bank to be more than the size of its capital – it discourages potential investors.
“We can only confirm that RosEvroBank shareholders are in talks and the EBRD (European Bank for Reconstruction and Development) is involved in them,” said EBRD representative Anton Usov.
“No agreements on changes in the composition of shareholders exist. No deals in the foreseeable future are expected”, – as per the press service of RosEvroBank. CEO and co-owner of RosEvroBank Ilya Brodsky (owns of 13.62% through a Cyprus based “REG Holding Limited”) assured that it’s not shareholders who are in talks about selling, instead they are constantly approached for acquisition because “the Bank is of interest to investors.”
RosEvroBank Holding belongs to REG (73.8%), European Bank of Reconstruction and Development (11%), Sovcombank (9.5%) and German investment Fund DEG (5.7 per cent). The offshore “REG Holding” is owned by Sergey Grishin, Andrei and Dmitry Suzdaltsev, Ilya Brodsky, Anton Besa and Oleg Vershinin, according to the materials of the Bank. Friend of one of the shareholder, said that negotiations are ongoing with several potential investors, both Russian and foreign – and if the deal is closed, it will not be so until the second half or end of 2017.
By the end of 2016 RosEvroBank held 42nd place in terms of assets size, and 24th place in terms of profitability (4.6 billion rubles). Low funding costs (4.4%) is the main competitive advantage of RosEvroBank, says Fitch analyst Dmitry Vasiliev. The Bank tries to attract as many current accounts and even if these funds were invested in Federal Loan Вonds (Russian government securities), it would still be possible to have a good margin, says Vasiliev. That is why the Bank has a stable portfolio of relatively low-risk borrowers, he says. He adds that the return on equity of RosEvroBank in the first half of 2016 stood at 32%.
“The main disadvantage of this business model – it is very difficult to scale. The Bank can not actively increase the loan portfolio and provide loans to large corporate borrowers of the first tier, although it could offer interest rates similar to state-owned banks”, – said Vasilyev. “The market situation is improving and, according to our recent studies, the market value of banks can be assessed with a multiplier of 0.7 to capital and 0.1 to assets”, – says CEO of “Euroexpert” consulting company Catherine Sinogeikina. Thus, the reference value for the Bank, according to her estimates, is about 20 billion rubles. Multiplier of capital 1 or above are not applied in the Russian market for several years now, it is a level of the European Banks with high quality assets says Sinogeikina.
“If we talk about transactions with shares of RosEvroBank conducted over the last 10 years, on average their cost was of higher proportion to capital”, – said the representative of the Bank. However, the last deal was much cheaper. In August 2015, Sovcombank bought a 9.5% stake in RosEvroBank from “Renfin” and “Renfin II” Funds. The first Fund has sold its stake of 8% for $13.7 million and recognized a loss of $1.3 million from the sale, the second Fund sold 1.5% for $2.4 million recognizing a loss of $198000 as stated in the financial statements of the Funds for 2015 (and as published on the website of the Bermuda Stock Exchange in January 2017). RosEvroBank’s capital at the end of 2nd quarter of 2015 amounted to 22.4 billion rubles, and the data from the transaction shows a multiplier below one capital. However, the Funds could make the decision about selling thier stakes due to significant losses from their financial investments. Both lost at least two of investments: “Renfin” invested in “InvestBank” (12,23%) and “ProBusinessBank” (3.61%) whose licenses were revoked by the Russian Central Bank. “Renfin II” was a co-owner in “Latvijas Krajbanka” (5%) declared bankrupt, and “First Republic Bank” (20%) license revoked by the Russin Central Bank in 2014.