If Andrei Kostin's bank gets its way, VTB will rocket ahead in retail lending and score a major image-making victory over foreign financial giants.
France's BNP Paribas tried to buy Russian Standard, and in the past few weeks the market was abuzz with rumors that Germany's number one lending institution, Deutsche Bank, is also eyeing it.
So far, the transaction has not progressed past the negotiating stage. The Russian media cite investment bankers as saying, on condition of anonymity, that VTB has already made an offer for a 10% stake in Russian Standard. The bank's owner, Rustam Tariko, has allegedly rejected the offer despite a very good price.
VTB's management has apparently shrugged off Tariko's refusal as an intermediary result. Experts say that the state-controlled bank will not abandon its plan to take over part or all of Russian Standard.
VTB must have Russian Standard to make its retail arm, VTB 24, the second-largest lender after Sberbank. As of now, VTB 24 is ranked fourth on the Russian retail lending market. This is not an impressive position, especially since VTB is financially a huge group that enjoys generous state support.
Is Tariko ready to sell? A month ago, I would have said 'No.' The bank's profitability was record-high, and it rejected several very interesting offers for a partial or full sale.
Deutsche Bank allegedly made an enticing offer, while BNP Paribas was ready to pay a record-high premium, with a price-to-equity ratio of 7. It was an unprecedented premium (Societe Generale bought a 30% plus two shares stake in Rosbank at a ratio of 5.9 this year).
It may seem that VTB stands no chance with Russian Standard, but observers say that the situation has changed dramatically since BNP Paribas made its offer.
On July 1, the Central Bank enforced its instruction obliging lending institutions to disclose the effective interest rate on loans to individuals. It came as a heavy blow for the majority of retail lenders, but Russian Standard suffered twice as badly.
The Prosecutor General's Office and the national consumer rights watchdog forced it to withdraw additional fees on loans, and to announce that it would restructure all bad debts on conditions favorable to clients.
Analysts have calculated that these "goodwill" gestures will cost the bank 6.2-6.7 billion rubles ($248-$268 million), or approximately 60% of its net profits for the first half of the year.
Although this is a heavy financial blow, it will not ruin Russian Standard. But it could undermine its attractiveness as an acquisition candidate. Or rather, potential buyers may take advantage of the decrease in the bank's profits to press for a lower price-to-equity ratio.
However, Russian Standard still has a few trump cards left, such as the persisting high demand for it in Russia and among international financial groups. Only Sberbank could be a larger goal for strategic investors, but it is not for sale.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
