FC Otkritie is a bank in good hands

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”.

In simple terms, the Public Joint Stock Company Bank “Financial Corporation Otkritie” is put up for sale. But for more than a year this search has been buzzing on the market. What is wrong with Otkritie Bank, why is the Central Bank unable to find a buyer for it?

A bit of history. And it is very rich in this credit institution. Let’s start with the fact that the bank, in the form in which we know it, was formed as a result of 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 partially the assets of Trust Bank, and so on. Integration was carried out on the basis of the Otkritie Holding financial group from 2000 to 2010.

And in 2017, the bank completely came under the control of the Central Bank of the Russian Federation.

This event was preceded by measures for the financial recovery of FC Otkritie.

It should be noted that it was in 2017 that a mechanism for financial recovery or rehabilitation was introduced with the participation of the Bank of Russia. This procedure provides for the provision of financial assistance by the Central Bank to banks and other credit organizations, including through the acquisition of shares in the authorized fund, the purchase of shares, the provision of interbank concessional loans, and a number of other measures.

By what principle and to whom the Central Bank provides such assistance, we cannot know, we can only guess. But it is known for certain that at the moment the following are 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)

But back to our long-suffering 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, the 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. (a copy of the order with a list of members of the provisional administration is at the disposal of the editors).

On December 21 of the same year, the temporary administration ceased its activities and the bank began to be considered “recovered”.

And so, on August 03, 2021, an Information Message appears on the acceptance by the Bank of Russia from interested parties of messages of intent to take part in the procedures for the sale of shares of PJSC Bank FC Otkritie

The document indicates the subject of a possible implementation:

“At least 50% of the total number of 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 the sale of at least 50% plus one share to one of the strategic investors.”

The Central Bank expected to sell the bank before the end of 2021 – this is directly stated in the same information message. However, the deal has not taken place to date. Although, information was leaked to the media about two likely contenders for the purchase of FC Otkritie – Gazprombank and the Region-Rossium group, the owner of the group is Russian businessman Sergey Sudarikov. It is noteworthy that already in 2020 Region acquired a solid stake in the Moscow Credit Bank (MKB).

Will Mr. Sudarikov also need Otkritie? Until the question!

According to Kommersant’s sources:

“The buyers of the blocking stake may be the structures of one of the largest businessmen who does not have his own financial business.”

But Gazprombank, that neither is the financial business itself, and even what kind, and “Region” joined the ICB. Against this background, the Central Bank does not exclude the possibility of selling shares through an IPO (Initial Public Offering) – an initial public offering, which, according to experts, is completely undesirable for the regulator.

The Central Bank, having spent no less than 0.5 trillion rubles on the reorganization of FC Otkritie. expects to get a real solid strategic investor who will return the money spent.

It remains to wait for the buyer. If this one does not appear in an evolutionary way, then 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:

“Knowing the intricacies of our economy, it is obvious that the sale of Otkritie Bank can, on the one hand, be a way to replenish the budget if the sale takes place in favor of a private investor. On the other hand, this may be a way to stimulate market mechanisms in the banking sector. But taking into account the fact that in our country 80% of the economy of the banking sector is state-owned, I do not think that this sale will strongly stimulate anyone. Of course, the Central Bank is interested in selling Otkritie soon. But we know he’s been tinkering with the sale of state-owned banks for a long time. For example, the Asia-Pacific Bank of the Central Bank sold 3 years. It was sold after the sonation in 2021 to a Kazakh investor for 14 billion rubles. This is with the bank’s own capital according to the semi-annual reporting at the time of the sale of 18.8 billion rubles.

“Opening” is a gigantic structure. For sale – not for sale … The question of price. But in general, we can say that there are no real interests in the current reality, if these are not people engaged, 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, and even of such a size. Rather, they will acquire a small bank and pump it up to suit their needs on their own … “

Return nested

Many investors have unsuccessful projects. At some point, a phrase sounds. Let’s try to at least return the nested. Already in 2021, the Central Bank was ready to sell both a controlling stake for 250 billion and a quarter. The deal has already been worked out with someone. It is not for nothing that quite specific steps are heard there, that some components of Otkritie Bank can be allocated and sold separately for the buyer.

From the message of the Central Bank: “Depending on the expressed interest of strategic investors, it may also be envisaged 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 blessed in advance in the quiet of high offices. And here we see that the offer has been stuck on the market for a long time. And public statements are similar to an anecdote, when 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 formulate the conclusions as contrastingly as possible:

1. The declared price does not match the bank. The price is dictated by the funds spent on the restoration of the bank. It turns out that the price is too high, or, looking at this medal from the other side, the state of the bank could not be brought to the desired level. This means that the Central Bank should be asked the question – does the owner, who has invested in one way or another, the funds of citizens in this bank, spent effectively?

2. The market is not developed. It is monopolized – the share of the largest bank in many segments exceeds a third or a half. State-owned banks (and a significant share linked to the state directly or through their owners) financial institutions Sberbank, VTB, Gazprombank, Rosselzokhbank and others clearly do not promote competition. Such markets will not push investors to seek investment. And being the regulator of this market, the Central Bank cannot but be reproached for the current picture.

There are many good fellows, not a single matchmaker

At various times, the market also discussed GPB as the main buyer. And even Sberbank German Gref Elvira Nabiullina wanted to persuade him to hold the asset for a while for the sake of appearance. 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 gave food for thought – is it not for the merger of these two quasi-state banks that have reached a plateau will they arrange pseudo-competition for other state-owned banks? But one way or another, matchmakers for this asset have been waiting in the upper room for almost a year.