Two more Russia bank deals close

By bne IntelliNews December 1, 2006

Ben Aris in Berlin -

Two more banks deals were closed in the last two days. Unistream, Russia's leading money transfer bank, sold a blocking stake to the private equity fund Aurora. And leading commercial bank Promsvyazbank completed a deal to sell a minority stake to German bank Commerzbank.

Unistream did not disclose how much the 26% stake cost Aurora, but the bank said in an interview with bne earlier this year it was hoping to raise $30m from the private placement.

"The deal signed enables us to more actively realize the Unistream's strategy of development in 2007-2008," Gagik Zakaryan, president of parent Uniastrum Bank and chairman of Unistream, said.

"We also benefit by working together with a Western company having enormous knowledge and experience in corporate management of business and that helps us to realize our IPO plans in 3-4 years," he said.

Russia's banking sector is on fire and analysts say the interest will only increase next year; despite this enthusiasm for Russian banks, they remain difficult to buy as many owners also anticipate fast growth and so are reluctant to sell.

Homeward bound

Unistream is one of the fastest growing banks in Russia and specialises in the money transfer business. A separate department in parent bank Uniastrum until recently, Unistream was granted a separate bank license in July by the central bank.

Russia's roaring economic growth - the Economic Development and Trade Ministry upgraded the end of year target for GDP growth to over 7% last week - has attracted an army of workers from former Soviet republics, who come to the big cities and send money home to their families. The bank has a total of 22,000 points of sale (including its partner banks) in over 80 countries.

And the money is not only flowing from Russia. One of the bank's most active branches is based in Los Angeles in the US, which sends tens of millions of dollars to Armenia every year. Pop singers Cher and Charles Aznavour are Armenia's most famous emigres, but Unistream's CEO Hayriyan Souren says the bank hasn't yet had the pleasure of their business.

Founded in 1994, Uniastrum is the 81st biggest bank in Russia by assets, but ranks in the top 20 in terms of the number of branches. Transfer volumes have been growing exponentially in recent years, rising from $250m in 2004 to $750m by 2005, which convinced management to spin off the transfer business. Unistream expects the growth to continue for at least another two years and volumes to top $2bn by the end of this year. Unistream has ambitious plans and has been looking for an international partner as part of its campaign to extend its reach.

Aurora was set up last year and raised about £75m with an IPO in March 2006. The first listed private equity fund specialising in Russia, Aurora has a general investment strategy, but has singled out the financial sector as a good place to start. Among the first investments was £12m in Kreditmart, a financial services company that was established at the end of last year, though the Unistream investment is by far the biggest to date.

"We have chosen Aurora because they have a great experience working on projects in Russia and international investments; they have experience in management of the IPO process. The company was also very fast in approving the decision to buy [the stake in Unistream]," says Zakaryan.

At last a deal for Commerzbank

Within days of the Unistream deal, Promsvyazbank (PSB) announced it had finished the paperwork on the sale of a 15.3% stake to German bank Commerzbank, which has been shopping for a strong Russian bank for over a year without success.

The bank is owned by the reclusive Ananyev brothers, who made their first fortune in the telecommunications sector.

PSB is widely regarded as one of the best commercial banks in Russia and owes its fast growth not to specialising in one sector or strong ties to government, but by concentrating on high-quality services and efficient implementation. Over the first half of this year the bank saw its net income nearly double to RUR1.1bn ($41m), while its retail loan portfolio is soaring and is expected to top $500m by the end of this year from only $94m at the start of this year.

Commerzbank, like the other international banks entering the Russia, is looking for a fast growing Russian bank with a strong retail presence.

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