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. Last Updated: 07/27/2016

Foreign Banks Tipped to Acquire More Assets

Itar-TassHerbert Stepic
Executives at Raiffesen International, one of the leading foreign banks in Russia, predicted Wednesday that Western financial institutions would snap up Russian banks in the next year or so to take advantage of the rapid growth in consumer banking here.

Speaking at a presentation about Raiffesen's recent acquisition of Impexbank, Herbert Stepic, CEO of Austria-based Raiffeisen International, said he expected other foreign banks to follow Raiffesen's lead in buying Russian banks in the same way that international banks snapped up Ukrainian banks after Raiffeisen's purchase of Bank Aval there.

Stepic said his bank was not currently planning any further acquisitions in Russia, but he left the door open for future purchases. "If a very nice bride passes by, we will definitely take a look. That goes without saying," he said.

Earlier this week Rair Simonyan, head of Morgan Stanley in Russia, said the U.S. financial giant would be interested in buying Russian mortgage banking assets, Bloomberg reported.

The ideal targets for a foreign bank would be among the 50 Russian banks with the largest branch networks, said Jeff Millikan, who oversees Raiffeisen's CIS operations. He identified Alfa Bank, Rosbank, and Promvsvyazbank as fitting this mold.

A spokeswoman for Alfa Bank said Wednesday it was not for sale but that it would consider a "strategic partnership with a leading international financial institution."

Rosbank, which is planning an IPO this year, declined to comment about any possible sale to a foreign bank. A spokeswoman said the bank had a presence in 66 regions in Russia, as well as 58 offices in Moscow.

Promsvyazbank, which has a presence in 30 Russian cities, said it would consider a partnership with a Western bank but had no specific plans to be sold.

A large branch network would be extremely valuable for a Western bank seeking quick access to Russian consumer lending, said Sergei Donskoi, a banking analyst at Troika Dialog.

"If you want to expand quickly, you need to have your branch network in place and not have to build it from scratch. It helps jump-start your business," he said. "If you value time more than money, it makes sense."

Vladlen Kuznetsov, a banking analyst with Moody's Investors Service, said Russian banks bought by Western banks would likely benefit from advanced technology and access to more capital, an expensive commodity in Russia.

In general, Western banks would benefit from acquisitions, too, because they would have a more diversified stream of earnings, he said.

"But on the other hand, if the bank has an increased concentration on the Russian market, it could theoretically weaken its credit profile," Kuznetsov said.