Binbank owner can sell its share for RUB1, expected to repay RUB350bn

Binbank owner can sell its share for RUB1, expected to repay RUB350bn
By bne IntelliNews September 22, 2017


Russia’s Central Bank of Russia (CBR) has started work on cleaning up the ailing Binbank (also known as B&N Bank) and the lender's main owner is ready to sell his share for RUB1 as well as repay losses of up to RUB350bn ($6bn).

Binbank’s largest shareholder Mikhail Shishkhanov was quoted by Kommersant FM radio station as saying that he was ready to sell his share in the ailing lender "for one ruble."

"I am ready to do whatever is needed, whatever CBR will require to make sure that the institution continues to exist and develop," he said.

Earlier, there were reports that the government could nationalize 75% of Binbank's shares, leaving the remaining 25% stake to the lender's current owners.

CBR has already provided bailout cash package to Binbank, the size of which is not being disclosed, Vedomosti reported on September 22.

According to the report, a hole in the lender's finances could be between RUB250bn and RUB350bn, and Shishkhanov and his relatives, who own Binbank, are ready to repay that sum.

If the size of the hole in the balance sheet is correct then the CBR will be on the hook for a total of RUB1.5 trillion if the RUB1.1 trillion already lent to Financial Corporation Otkritie is included, which the CBR was forced to rescue at the start of this month. To put that into context, the Ministry of Finance this month estimated the entire federal budget deficit for this year will come to RUB1.3 trillion, or 1.4% of GDP.

Earlier, Shishkhanov, who has a strong reputation as a good banker, said that the main reason for Binbank's difficulties were toxic assets it inherited from its CBR-sponsored rescue of MDM Bank, formerly one of Russia’s best commercial banks, which BIN acquired in late 2016.

The CBR report on banks for August show that Binbank was the hardest hit by the spill over fears from the Otkritie take over.

"According to monthly local GAAP data, Binbank appeared the most affected name among private majors amid the liquidity stress at Otkritie FC. Particularly, the bank saw RUB13bn ($225mn) of net customer deposit outflows (including RUB22bn related to retail and RUB13bn to state clients, partially substituted by new non-state corporate accounts of RUB22bn) and about RUB 25bn of lost interbank funding, which was met with a sale of liquid debt securities (about RUB80bn)," Raiffeisen bank said in a note.

Binbank is the second to be included in the new Banking Sector Consolidation Fund (BSCF) that was set up earlier this year and also used to rescue Otkritie. Apparently the fund was established for the express purpose of dealing with commercial banks that get into trouble but are too large to bail out.

The process of cleaning up Binbank is expected to take between three and eight months.