Barclays will sell its banking operations in Russia to banker Igor Kim, while retaining its presence in the investment market.
Tough competition from Russia’s banking giants made Barclays operations inefficient, prompting it to focus on other more attractive segments, Barclays CEO Bob Diamond explained back in February of this year. The bank said back then that it was looking for an efficient operator in Russia, capable of further developing the existing platform.
A group of Russian investors led by Igor Kim, a co-owner of Russia’s MDM Bank and Orient Express Bank, became the choice. The group will get Barclays’ corporate and retail businesses in Russia, but some divisions of Barclays will remain in Russia’s investment market. Barclays Capital, its brokerage and dealer company, and Barclays Wealth, the group subdivision for managing large private capital, will be working in Russia in their usual manner, the bank said.
While the parties have not disclosed the financial terms of the deal, most Russian experts assume there will be a significant discount – somewhere around 15-20% – to the bank’s capital.
Barclays bought Expobank for $745 million back in 2008, just ahead of the onset of the global economic turmoil. Given the bank’s losses, which stood at about $11.34 million for nine months of 2011, the price of the deal, concluded right at the peak of the euro crisis, should not be exceed $157 million, calculated Maxim Osadchiy, head of the analytical department at BKF Bank.
The buyers will be able to use the Barclays brand during a transition period of up to nine months, which will let Kim play on the brand and make preparations either for an acquisition by some big Russian bank or to join Barclays assets to either of Kim’s existing assets and cover the losses from the deal by sound financial results, said Investcafe analyst Nikita Ignatenko.