Buyers of subsidiaries of Russian state banks in Ukraine are rushing to take advantage of the worsening situation around them in the hope of acquiring assets cheaper. As it became known to Kommersant, the price offer of potential buyers of VTB (Ukraine) fell to $50 million, and the largest deal to sell the Ukrainian entities of Sberbank failed at the last moment. The price was originally discussed at $680 million, but the Ukrainian party tried to make the sale of the Lipetsk confectionery factory (LCF) of the Roshen holding company to President Petro Poroshenko part of the deal.
Two sources of Kommersant told about the collapse of the deal on the sale of Ukrainian Sberbank. According to one of them, the negotiations intensified in December, after the Ukrainian party was joined by ICU Managing Director Makar Pasenyuk and businessman Igor Voronov. In whose interests they were conducted, the interlocutor of Kommersant didn't say, but, according to another source of Kommersant, the beneficiary is the president of the DCH group and the former co-owner of Ukrsibbank Alexander Yaroslavsky. Investgroup ICU is the consultant of Roshen on the purchase and sale of assets, in 2007-2014 its board of directors was headed by the current head of the National Bank of Ukraine Valery Gontarev.
Mr. Yaroslavsky is the main contender for the Ukrainian Sberbank, confirms another interlocutor of Kommersant. Information about the businessman's interest in the asset first appeared in May 2016. Since then, negotiations have been conducted with varying success. The parties, according to the Kommersant source, were close to reaching agreements twice, but first Sberbank demanded the provision in the form of personal guarantees of Mr. Yaroslavsky, which he disagreed with, and then "a big politics interfered in the matter."
At the end of January, Mr. Pasenyuk proposed to make part of the deal "a conceptual agreement that would also include the sale of the Roshen factory in Lipetsk," a Kommersant source said. Roshen acquired the LCF in 2001. Problems of the holding company in Russia began in 2014, and in April 2015, the property of the factory was arrested to the amount of 181.5 million rubles, which the company, according to investigators, received as a refund of VAT on falsified documents. The arrest did not prohibit the operation of the LCF, but limited the transactions with the property. In the spring of 2016, Mr. Pasenyuk assumed that the LCF would soon be sold. The sources of Kommersant said that the confectionery association Slavyanka might be interested in the deal, but it not take place (see Kommersant dated January 21).
The deal on the sale of Ukrainian Sberbank, according to the sources of Kommersant, was blocked at the presidential level. "Initially, $680 million was offered, but after the announced cost of the the LCF at $250 million while the real is not more than $120-140 million, the negotiations lost all meaning for the Russian party," one of them noted. The result, in his opinion, was that Roshen on January 20 announced the halt to the production at the LCF and plans for the conservation of facilities in April.
Sberbank refused to comment. All attempts to contact Mr. Yaroslavsky failed. According to the interlocutors of Kommersant, he retains interest and "expects new offers from the seller." The other day the head of Sberbank Herman Gref reported that he was looking for options for a quick exit from Ukraine.
"The collapse of the LCF deal played a catalytic role for the Ukrainian authorities to impose sanctions on Russian state-owned banks," a source in Kommersant believes. Sanctions were announced on March 16 against five entities of Russian state-owned banks for a year: Sberbank and its VS Bank, VTB, BM-Bank (related VTB) and Prominvestbank (PIB). They are prohibited from withdrawing capital outside Ukraine in favor of the persons connected with them. Yesterday, the NBU issued a decree imposing a ban on withdrawal of funds, payment of dividends, interest, return of interbank deposits and loans, funds from correspondent accounts subordinated debt, distribution of profits and capital.
Negotiations on Ukrainian subsidiaries of VTB was also recently led by Mr. Pasenyuk, Kommersant sources say. Previous attempts were unsuccessful due to the inability of the head VTB to leave the funding provided to the subsidiaries This was confirmed in an interview with Kommersant in the fall of 2016 by the first deputy chairman of VTB Yuri Soloviev. But the sanctions made the return of funds impossible in any case.
VTB wanted to get about $200 million for VTB (Ukraine), which roughly corresponds to the investment, a source in Kommersant said in the Ukrainian market, but the problem is that the loan portfolio is "very problematic" (according to Kommersant, it is estimated at $3.5 billion, the largest among Ukrainian subsidiaries of the Russian banks). According to another interlocutor of Kommersant, now only about $50 million is given for the asset. "Different candidates were interested, but it did not go far". According to him, VTB Group sells BM bank separately, the results are still unknown. VTB declined to comment.
VEB was the first to say that it intends to sell PIB and began to look for buyers openly. On Tuesday, VEB head Sergey Gorkov said that he could make the final decision next week. The bank is interested in two or three potential customers, including the Hungarian bank OTP, he said. However, now, according to Mr. Gorkov, they (OTP) need more and more time to make decisions, so the number of interesants can be designated, rather, as "two plus." According to Kommersant sources, these are the head of the Kiev region boxing federation Sergey Tron and businessman Valery Khoroshkovsky (in 2005-2005, the president of the Evraz group). VEB declined to comment.
The NBU yesterday told Kommersant that negotiations for the sale of these banks were continuing, although no official documents for the acquisition of either had been received. The NBU refused to name the potential buyers.
Executive Director of the International Blazer Foundation (Ukraine region) Oleg Ustenko doubts that sanctions will greatly affect the sale and price. "The main problem is to find a buyer for an asset for which the multiplier was paid from 1 to 2 in conditions of a good economic situation." Now the main question is how to minimize losses. "If you need the fastest possible exit, you will have to give a discount," he says.
The banking system of the country, in his opinion, stood out thanks to foreigners. In 2016, Ukraine received $3.4 billion, of which $2.5 billion poured into the banking system. Foreigners, trying to save their bankы, made capitalization. According to Kommersant, Russian banks spent $1.55 billion for this purpose, and $500 million accounted for the western banks (in 2014-2016, $3.47 billion and $1.21 billion, respectively). In 2015, there were 180 banks in Ukraine, in 2016 there were less than one hundred, and all those who left the market were local. "But the situation has somewhat improved, and the regulator can afford to focus not only on economic, but also on geopolitical criteria," the expert said.
ICU financial analyst Mihailo Demkiv agrees that the sanctions have no decisive influence on the sale. Loans from the parent structures for all five banks worth $1.3-1.5 billion (loan, sub-debt, correspondent account and overnight). The money given for loans that are not returned. According to statistics of the NBU, the percentage of bad loans for the five banks ranges from 45% to 90%, VTB has the largest, 90%. In fact, the expert notes, this money is a quasi-capital. Banks can convert them into capital and sell a fully capitalized bank.
The Central Bank smoothes the effect of the Ukrainian sanctions
The Bank of Russia in connection with the emergency situation that arose as a result of the decision of the Ukrainian authorities regarding the subsidiaries of Russian banks operating in the territory of this state, plans to allow Russian banks to form reserves for all losses on Ukrainian subsidiaries by installments within three years, reported the CB's press service. Ukraine has imposed sanctions against Ukrainian Sberbank and VTB, BM Bank (part of VTB Group), Prominvestbank and VS Bank (Sberbank's subsidiary) since March 23, for one year. They are prohibited any financial operations in favor of the persons connected with them, in particular "parent" structures.
Sberbank, VTB and VEB refused to comment. They did not disclose data on the volume of reserves formed due to the Ukrainian risks and the extent to which these risks were covered by reserves. However, some data related to Ukrainian risks and their reservation were named earlier. So, on March 21, the head of Sberbank Herman Gref said that to date, Sberbank's reserves "related to Ukraine" account for approximately 70% of potential losses. VTB Chairman Andrey Kostin on March 16 noted that he estimated the amount of potential losses in Ukraine as insignificant, since the bank had already formed the basic reserves. VEB is not a credit institution (it has the status of a state corporation) and the Central Bank's requirements for reserves do not apply to it.
According to Olga Ulyanova, senior analyst at Moody's, the Central Bank's easing looks more like a gesture of goodwill and support for Russian banks. The Ukrainian subsidiaries are so small compared to their parent structures that the impact of possible losses for the latter will be insignificant and at least in the case of Sberbank and VTB will be comfortably absorbed by the profits of these banking groups," she explains. "As for Vnesheconombank, the Central Bank's standards for the adequacy of capital are not obligatory for it, the corporation adheres to them as covenants in its market instruments. On our estimates, even in the most conservative scenario of the development of the situation with the Ukrainian subsidiary, the covenants of VEB would not have been violated. " Sberbank's aggregate share of Ukrainian subsidiaries in assets is 0.5%, VTB has 0.43%, VEB has 2%, as valued at Moody's.