GE Money Bank puts Russian unit back on the market, claim sources

By bne IntelliNews December 19, 2012

bne -

GE Money Bank, which kicked off a wave of foreign acquisitions in Russia's banking sector, is up for sale, according to market sources. The move marks the end of era in the development of the country's financial sector.

Back in 2006, the purchase of Delta Bank by the US retail banking giant marked the start of a frenzy of bank-buying that saw multiples on financial assets soar. The action also spread to Ukraine and Kazakhstan. However, after flirting with unloading the bank earlier this year, GE Money Bank has now given up on Russia as a bad job, and is ready to sell up reports RBC Daily, citing unnamed market sources.

During the boom, foreign banks paid top dollar to get into a Russian market in which assets were soaring by up to 50% a year. However, things quickly turned ugly when the global credit crunch hit in late 2008, nearly wiping out those same assets. None of the banks that bought ahead of the crisis had time to build up enough of a business to hold their own in a sector where growth stopped overnight.

This year, asset growth has climbed back up to 25% or so. While that's still clearly healthy, the big difference is that state owned giants Sberbank and VTB have become very aggressive, and are using their institutional advantages to take market share. That has seen foreign banks leaving in droves over the past couple of years. Only those banks like Societe Generale, Raiffeisen and Home Credit Finance Bank, which bought into the sector in the early naughties, are still in the game and likely to survive.

General Electric, the owner of GE Money Bank, is now reopening negotiations with potential investors after dropping a tentative plan to exit in the summer, several sources claim. Included is the enfant terrible of Russian banking, Igor Kim, who showed interest in the asset early this year. Kim has already bought Expobank from Barclays, which was one of the first foreign players to quit Russia after having bought at the top of the market in 2007. Kim has also been snapping up other niche banking assets on the cheap post-crisis.

GE Money Bank has yet to make a formal offer, reports RBC Daily, nor is it known if Kim is interested in the asset, but speculation is rife after following an offer to him by Belgium's KBC Group to take Absolut Bank off its hands. Kim has reportedly shown interest and offered RUB8bn ($260m) against an asking price of RUB11bn.

Even if nothing comes of GE Money Bank's attempt to leave Russia, the reports highlight that foreign universal banks with a retail strategy are finding it increasingly difficult to work in Russia. The same is true for investment banks, highlighted by the sale by Stephen Jennings of his remaining stake in Renaissance Capital to Mikhail Prokhorov in November. Russian banking is increasingly just for Russians.

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