RBS to sell its Kazakh lender to Russian banker Igor Kim

RBS to sell its Kazakh lender to Russian banker Igor Kim
RBS exited Russia in December 2015.
By Jason Corcoran in Moscow March 10, 2016

The Royal Bank of Scotland  has agreed to sell its lender in Kazakhstan to Russian banker Igor Kim just months after offloading its Russia business to the same banker, bne IntelliNews reports exclusively.

RBS, the UK's largest-taxpayer owned bank, is selling its Kazakh corporate and institutional lender to Kim six years after exiting its retail business in the Central Asian country, the British lender told bne IntelliNews

"In line with our strategy to build a stronger, simpler and more sustainable bank, better aligned to the needs of our customers in the UK and Western Europe, we have signed a deal to sell our Kazakhstan business to Mr Igor Kim," a RBS London-based spokesman told bne IntelliNews.  "We believe this to be the best possible outcome for clients and employees."

The deal was signed seveal weeks ago and is expected to close during the second quater, banking sources told bne IntelliNews.

"RBS has been trying to get shot of this business for a while and Kim was the obvious fit after the Russian sale," one senior Moscow source said.

Igor Kim refused to comment on the deal by mobile.

RBS's Kazakh business has offices in Almaty, Astana and Atyrau. The bank, previously owned by ABN AMRO, in 1994 became the first foreign bank to begin licensed operations in Kazakhstan that offered wholesale banking.

British rival HSBC sold its Kazakhstan unit for $176mn to local player Halyk Savings Bank in late 2014. HSBC had bought RBS's Kazakh retail business four years earlier. 

RBS, which last month posted a £2.74bn ($3.8bn) loss, is restructuring its global corporate and institutional banking business as it tries to cope with ballooning litigation costs.

Kazakhstan, the second-largest oil producer in the former Soviet Union, is struggling to cope with a plunging currency as tumbling crude prices and devaluations by neighbouring Russia and China forced the central bank to shift to a floating exchange rate in August. 

Kim, who was born in Kazakhstan to ethnic Koreans and raised in Russia's Far East, is one of the biggest dealmakers in Russia, hoovering up an average of two banks a year in a career spanning 24 years. 

Now the notoriously publicity-shy banker is diversifying overseas. In December, Kim snapped up the London-based FXCM Securities Limited just days after landing RBS in Russia. Last year, he also moved into central Europe, buying a small bank in the Czech Republic – and he is looking to expand his horizons further into the Balkans and Western Europe.

Kim first sprang to prominence in the early noughties by consolidating control over a string of banks in Russia's hinterland east of the Ural mountains using his Sibacademicbank as a vehicle, which was later transformed into Ursa Bank and floated. 

After this Kim took over the management of MDM bank, formerly a top-tier Russian universal bank, but the efforts fell on stony ground and MDM's fortunes have faded, although it remains a significant bank.

Finally, Kim bought Expobank from Barclays after the 2008 crisis scuppered the UK lender's grand plans to move into Russian retail banking. Barclays had bought Expobank from mining entrepreneur Peter Hambro at the top of the market during the boom years and reportedly the people at Barclays responsible for that deal have since been fired. 

In recent years, Kim has refocused Expobank from retail and is more focused on corporate banking, especially targeting lower-risk, fee and commission-driven business with corporate and high net worth individuals. Expobank was founded in Russia's Far East in the 1990s.

Not everything Kim touches turns to gold.  Kim is a shareholder in Orient Express, a consumer lender with a strong presence in Siberia and Far East.

Orient Express, which was ranked among Russia's top-30 banks by assets, bought Morgan Stanley's mortgage bank and Santander's consumer lending unit in 2010. However, the recession has hit the consumer lending market hard and Orient Express is struggling to cope with spiralling rising loans and problem loans in excess of 30% of its overall loan portfolio.

Baring Vostok, the private equity firm which was lured into the bank by Kim, has had to dig deep and spent RUB2.6bn last year propping up the lender.

Baring, headed by American Michael Calvey, is desperately looking for a partner to salvage Orient Express while Kim exited the lender's shareholding structure entirely in October. Baring has increased its shareholding to 75% from its initial 30% stake in 2010.