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. Last Updated: 07/27/2016

VEB Picks 3 Bids for Postal Bank Partner

Two foreign banks and as many Russian lenders will continue a high-stakes race to become the state’s partner in a sprawling retail bank that officials want to rank as one of the country’s largest, a state bank chief said Wednesday.

Of the seven bids Vneshekonombank received to join its Postal Bank project, the state-owned development bank selected three. Italy’s UniCredit and domestic lender Russian Standard made independent bids, while the Czech Republic’s Home Credit and Finance Bank and domestic lender Nomos-Bank bid jointly, VEB chief Vladimir Dmitriyev said, following a VEB supervisory board meeting chaired by Prime Minister Vladimir Putin.

The bidders will submit proposals for a “financial model” of cooperation by July 1, which VEB will use to make a final choice. The partner will help VEB invest between $5 billion and $10 billion in the Postal Bank, Dmitriyev said.

VEB wants the new bank to challenge market leader Sberbank, at least in terms of the number of outlets. Sberbank has 20,000 offices around Russia.

Potential partners are invited to take a stake of 25 percent to 50 percent in the Postal Bank, which is expected to grow out of Svyaz Bank, a distressed lender that VEB acquired during the 2008 financial crisis.

The new lender will operate from offices of Russian Post, which more than double Sberbank’s number of locations.

UniCredit qualified because it helped turn around the postal service in Italy, Dmitriyev said.

Russian Standard passed the selection thanks to its extensive consumer loans experience and network, Dmitriyev said. He did not explain why VEB selected the third bid.

Mark Rubinstein, an analyst at Metropol, said Nomos did not suffer any major setbacks during the economic downturn and had the resources to expand. Home Credit specializes in consumer loans as well, he said.

The winning bid will secure a powerful ally in VEB to help it gain greater market exposure, Rubinstein said.

“State support means a lot in this country,” he said. “Wider penetration will increase the client base and therefore, profits.”

Russian Standard said in an e-mailed comment that it was grateful to the government for the initial approval, adding that the institution had the potential to create “the world’s best postal bank.”

Calls and e-mails to the press offices of the other banks went unanswered Wednesday evening.

By offering financial services, Russian Post would be following the global trend, as letter carrying volumes drop under pressure from e-mail.

The state has long been trying to boost Russian Post’s profile as a financial institution since at least 2007, when Sberbank president Andrei Kazmin was asked to lead the state-run post’s restructuring. He left in 2009.

Rubinstein said the Postal Bank was unlikely to rival Sberbank, but it could well become a medium-range lender.

“The market is highly competitive,” he said. “It’s difficult to grow there.”