SocGen Says Rosbank Deal Still On

VedomostiSociete Generale currently controls 20 percent minus one share in Rosbank.
France's Societe Generale insisted Monday it will close a deal to take a controlling stake in Rosbank in the next two weeks, after analysts cautioned that the scandal-hit bank may find it difficult to complete the acquisition.

Speaking to radio station Europe 1, SocGen chief executive Daniel Bouton said the bank would conclude a deal on Feb. 11 with billionaires Mikhail Prokhorov and Vladimir Potanin to raise its stake in Rosbank to 50 percent plus one share.

SocGen, which has a presence in Russia through its local subsidiary, Banque Societe Generale Vostok, currently has a stake of 20 percent minus one share in Rosbank and intends to take up an option to buy another 30 percent plus two shares for $1.7 billion.

But SocGen's own future was looking shaky this week after it reported the world's largest-ever trading loss at the hands of rogue trader Jerome Kerviel. The bank, which moved to unwind Kerviel's deals in secrecy, said it had lost 4.9 billion euros ($7.2 billion) as a result of the fraud.

Bouton shrugged off speculation Monday that Kerviel had been acting in the interests of a "Russian bank."

Adding to its woes, SocGen has declared 2 billion euros in subprime writedowns for the fourth quarter of 2007. It has said it will remain profitable for the full year.

"It cannot be ruled out now that BSGV could be taken over by rivals," said Maxim Osadchy, an analyst at Antanta Capital. "It looks very doubtful that an institution that could be taken over itself or even split would be capable of swallowing up other banks."

The Paris-based lender acquired its 20 percent stake through two separate deals in 2006. The 30 percent option runs until the end of this year.

SocGen played down fears Monday that the Rosbank deal was under threat.

"The acquisition of Rosbank will go ahead as planned," BSGV spokeswoman Yelena Kozhadei said in e-mailed comments Monday. "The development strategy of BSGV remains unchanged."

SocGen's Bouton reiterated Monday that the bank has the cash ready for the deal.

Onexim said it was continuing talks with SocGen. "We don't see any reason for concern, and find it difficult to see how the situation with SocGen could influence the Rosbank deal," said Alexei Ryabinkin, a spokesman for Onexim, in e-mailed comments.

Interros, Potanin's holding, declined to comment.

A controlling stake in Rosbank would give SocGen access to the country's highly attractive banking sector, which Sberbank CEO German Gref last week predicted would grow by 25 percent this year.

Mark Rubinstein, a banking analyst at Metropol, said he was confident the deal with SocGen would go ahead as planned. "SocGen has 1 trillion euros in assets. Its business strategy is not affected even by a loss of that magnitude," he said.

Natalya Orlova, chief economist at Alfa Bank, pointed out that the deal presents a real opportunity for SocGen to grow its Russian business. "There is no interest in breaking this deal," she said.

According to sources inside Rosoboronexport, SocGen executives were pushing the deal through as fast as possible to fend off a possible challenge from the state arms trader, Vedomosti reported last month. Rosoboronexport, which has accounts in Rosbank, has reportedly resisted the sale of the corporate side of the business to SocGen on grounds of national security, citing the sensitive nature of the financial information held with the bank.

Rosoboronexport refused to comment on the claims Monday.

The deal could also still face resistance from another quarter. As part of an ongoing dispute involving the division of Prokhorov's and Potanin's assets, a Moscow arbitration court last week upheld an injunction obtained by Prokhorov to block the sale of assets held by their joint holding, KM Invest. The assets include a 69 percent stake in Rosbank.

Rosbank shares, which fell 3 percent Wednesday through Friday, fell a further 1.6 percent Monday on MICEX.

Staff Writer Anna Smolchenko contributed to this report.