Vodka to rescue: how Roustam Tariko is saving Russian Standard bank

The owner of Russian standard Roustam Tariko increases the capital of his bank with the shares of his vodka company for the second time this year. RBC is investigating, whether that operation will help the bank
Origin source
"Infusion" in the capital

On Monday, August 3, the bank "Russian Standard" in the disclosure of the information reported that its parent company, ZAO "Russian Standard" will give the bank "grant support" in the amount of 9.35 billion rubles. The bank also announced the planned purchase from Roust Trading Ltd (combines alcoholic assets Tariq) 23% of the share capital of the company "Russian Standard Vodka" (producer of vodka "Russian Standard" and the owner of the brand of the same name). The Board of Directors may approve the deal as early as September.

The official representative of the bank "Russian Standard" comment on the impending deal has not provided. RBC source close to the bank, explained that the capital increase will be carried out in the same manner as in May and June of this year, when the bank bought shares in the vodka company's own funds, and shareholder of the company has made the money as a contribution to the charter capital .

In June Tariq thus capitalize the bank at 3.8 billion rubles. In May, "Russian Standard" at the expense of own funds bought shares of alcoholsecond company, and the proceeds from the sale of shares a shareholder has made money in the bank as grants, thus increasing the capital base, said S & P analyst Sergey Voronenko. A source familiar with the process of recapitalization, told RBC that it was about Roust Corporation shares of the company. "As a result, the bank's liabilities were cash, which can be used to cover losses, and assets - shares Tariq alcoholic holding", - the expert explains.

"The bank has a certain liquidity cushion at least in the form of investments in other securities that it could release" - Voronenko said. Nevertheless, he thinks that the new deal does not include the actual cash payments, and will be solely an accounting operation.

In S & P have any questions to this form of recapitalization of the bank, said Voronenko. The first concerns the assessment of the share in the "Russian Standard Vodka": it is unclear whether the 23% estimated the company to 9.35 billion rubles. or shares are worth less, and the remaining funds will go to the capital in cash. The second - the influence on the specification,which may be under strong pressure (danger of being broken) after the acquisition of shares for 9.35 billion rubles. "The quality of this capital will be quite weak", - the expert concludes.

losses under pressure

"Russian Standard" in dire need capital base, but so far all indicators are normal. In 2014, the bank received a record loss of 15.9 billion rubles., Says in its IFRS financial statements. As a result of capital "Russian Standard" halved - from 33 billion to 16 billion rubles. Losses hit on the adequacy of capital base: at the beginning of the year it was 6.4%, and by 1 June, despite the May capitalization, this index decreased to 6.17% (with a minimum established by the Central Bank at the level of 5%).

Increase the capital by the bank is not able to profit - this year it continues to bring losses (5.6 billion rubles for the six months of 2015.). "According to S & P, the bank's losses in accordance with IFRS for the year could reach about 15 billion rubles, and he desperately needed additional capitalization will be approximately the same amount." - Says Voronenko. The same opinion analyst at UBS Xenia Mishalkina.

AnalMoody's teak Proklov Alexander notes that the capital increase to 9.35 billion rubles. can significantly reduce the pressure on the capital, offsetting losses from the bank's operations, provisioning, etc. Additional capitalization will increase the core capital adequacy to 7-8%, estimates analyst Sberbank CIB Dmitry Polyakov. According to him, this infusion will enable the bank to cover losses (according to Russian Accounting Standards) for the next few quarters.

Delay increases

Like other banks that specialize in retail lending portfolio of "Russian Standard" is reduced, and its quality deteriorates. The share of overdue loans in the retail portfolio, "Russian Standard" in the July 1, 2015 amounted to 27.7% for the month decreased by 3.5 percentage points through the sale of bad debts of more than 14 billion rubles. By "Aton" estimates, excluding the sale of the share of delay would have been 34.5%.

This cover arrears reserves decreased to 79% - is much less than that of other retail banks (the average coverage ratio in 2014 was 106%) and historical VALUEnd of the "Russian Standard". The analyst "Aton" Ivan Kachkovskii estimated that for 100 per cent coverage of overdue loans by provisions of 1 July, "Russian Standard" would have dosozdat reserves of 10.9 billion rubles., While the ratios of the base and of the bank's capital would be reduced to 3, 3-3.6%.

In addition to deteriorating portfolio of pressure on the bank's capital Tariq provide non-core assets. "We believe that the bank, in fact, there is no capital base - due to projected us further losses and a significant amount of bad assets on the balance sheet, which is equal to own funds", - wrote in a note to clients the analyst one of the investment companies, who asked for anonymity. Among the assets, pressures on capital, Fitch Ratings press release dated July 17, it has named non-core corporate loans by 10 billion rubles., Of which 3.6 billion rubles. issued to related parties, as well as investment in associated company in the amount of alcohol to 3.8 billion rubles. According Roust According to IFRS for the first quarter of 2015, alcoholic holding Tariq must "Russian Artndartu "$ 52.2 million - on loans to related parties accounted for almost one third of the holding company obligations.

Where to get capital

Analysts point to several sources of capital base for the "Russian Standard". If the bank closer to the "point of failure", that is the norm of capital base will fall to 2%, for the restoration of credit in whole or in part, will be charged subordinated Eurobonds Bank for $ 550 million. "Russian Standard" for the realization of such a scenario would have to suffer a loss of about 15 5 billion rubles. c 1 April Kachkovskii counted. "In the absence of external inflows restore capital position due to write-off of a new subordinated debt, we believe it is very likely," - said in a note to the analyst, who asked not to be identified. - This scenario, in our opinion, is also satisfied with the regulator, do not affect the interests of investors and reduces the amount of required capital increase. "

"Capitalization" in-kind "[through the purchase of shares vodka company] is not the best option from the point speniya holders of bonds of the bank - says Polyakov of Sberbank CIB. - Ideally, they would like to see the capital injection without the purchase of illiquid shares of the business without a clear asset value. " Nevertheless, this recapitalization nevertheless increase capital base and enable the bank to meet the requirements of the regulator, which reduces the probability of reducing the standard core capital of up to 2%, and following the cancellation of these subordinated Eurobonds, notes the analyst.

To help with the additional capitalization of banks may be the government. "Russian Standard" may be additionally capitalized through the OFZ 5 billion rubles., Previously wrote RBC. In the first quarter of 2015 the bank's accounting standards, the "capital increase of Russian banks through government DIA" called one of the main "positive factors, providing an opportunity to improve the activity of the issuer." Deputy Finance Minister Alexei Moiseev says that "Russian standard" proposal has not been made. According to RBC's source in the government, the question of whether the bank to take into account the money received from the state in the capital of the first level will be able to, is not yet resolved. <br />
Height loss

Alcohol business Tariq increased more than tenfold in the last four years. In December 2011, the owner of "Russian Standard" has bought for € 100 million 70% of Italian wine house Gancia, who at the time of purchase showing losses and had net debt of € 45 million. Another $ 440 million Tariq spent for the purchase on the verge of bankruptcy of the largest producer of alcoholic beverages in Central and Eastern Europe, Central European Distribution Corporation (CEDC), taking over the company's liabilities by $ 650 million and received for this loan of $ 100 million of investment units "Alfa group" A1.

On buying alcoholic assets were spent dividends received by a shareholder of the bank in 2011-2012. "Russian Standard" has paid him 4.9 billion rubles. This was another reason for the low level of the basic capital of the bank, indicated in March, the agency Moody's. In addition, the bank on the initiative of its owner bought CEDC bonds, which have been restructured in the sale of Tariq. The volume of securities on the balance of CEDC "Russian Standard" reached 5 bln., And during 2012-2013 years of the bank gradually write off losses on these instruments. Only in the first half of 2013 the volume of write-downs on these securities amounted to 1.6 billion rubles., Because of what the bank received a loss in the reporting period.

Roust Holding, in which Tariq combined his alcohol business, eventually went to the second place in the world in terms of production of vodka. But the company is losing money.

Roust Sales in the first quarter of 2015 fell by 38.4% to $ 107.5 million, according to Roust IFRS. Net sales in Russia (the main market for the company) for the same period fell by almost half -. From $ 109.4 million to $ 51.1 million Roust explains the drop in negative market trends, the fall of international sales and the negative effect of the weakening of the ruble. Roust share in the Russian market declined by 2 percentage points to 10.9%, due to the "regular talks" with key clients (national key accounts) of the price increase, providing discounts on contracts and reducing stocks of distributors, continues to during the first quarter. "

Despite the drop in sales, thanks to almost halve the company's operating costs couldearn in the first quarter operating profit - $ 6.3 million versus $ 6.2 million for the same period last year. Net loss decreased to $ 37.5 million versus $ 48 million for the same period last year. But the "real" money from the alcohol companies do not have - for the first quarter of this year, it showed a negative operating cash flow (minus $ 29.5 million).