Barclays Tipped to Buy Into Expobank

VedomostiExpobank may be looking to sell a controlling stake to Barclays, whose investment-banking arm left Russia in 1999.
British banking giant Barclays, whose investment-banking arm left Russia in 1999 nursing $250 million in losses, could be poised to enter the country's fragmented market with the acquisition of small-size lender Expobank as it looks to tap the country's underdeveloped mortgage market.

Banking sources close to the deal said Barclays was nearing a conclusion in talks to buy a controlling stake in the lender, with the option to increase its stake to 100 percent, Vedomosti reported Wednesday.

The deal was initially priced at 10 billion rubles ($406 million) but has been since pared down, the newspaper said without providing further details.

Barclays refused to comment on the reports Wednesday. "We have said previously that we are looking at emerging markets, and we will look east rather than west," a London-based spokesman for the bank said.

Expobank vice president Rory Carleton-Paget declined to confirm the reports Wednesday. "We do not comment on market or press speculation," he said. "If we have anything to announce, we will do so."

Pavel Maslovsky, a 25 percent shareholder in the bank, indicated that several parties, among them Barclays, had shown an interest in Expobank. "We have not reached an agreement with any of them," he said, denying that the bank was for sale, Vedomosti reported.

Kirill Yakubovsky, chairman of Expobank, also denied the reports, the newspaper said.

British businessman Peter Hambro, who has extensive interests in Russia's gold-mining industry, and long-time business associate Pavel Maslovsky bought into Expobank in 2006 and now hold equal shares alongside Expobank executives Kirill Yakubovsky and Andrei Vdovin through a holding group, Petropavlovsk-Finance.

British banks have been slow to tap the Russian banking sector's potential. Barclays Capital, the investment bank chaired by Hans-J?rg Rudloff, said in January 2007 that it was planning to open a Moscow branch by the end of the year.

Rudloff sits on the board at state-owned oil company Rosneft.

Barclays, Britain's third-largest lender, was one of the country's worst-hit banks in the subprime mortgage crisis, revealing ?1.3 billion ($2.55 billion) in write-downs in November.

Interest in Russian banks remains high among foreign investors, as the sector offers healthy growth rates even amid the global financial turmoil. But the country's lenders have not emerged unscathed, with analysts noting the difficulties faced by small and mid-sized lenders in tapping sources of long-term credit for expansion.

Richard Hainsworth, head of the RusRatings agency, said it was "an appropriate time" for Barclays to enter the market. "It is probable that valuations are [now] cheaper -- they are certainly cheaper than they were a year ago," he said.

As of Jan. 1, Expobank had 29.7 billion rubles ($1.2 billion) in assets, and it was among the country's largest 100 banks last October, Interfax reported.

Natalya Orlova, a banking analyst at Alfa Bank, said she would value a 100 percent stake in Expobank at $400 million.