Cbanker: Purchase of Rosgosstrakh worsens condition of Otkritie

MOSCOW, Aug 30 (PRIME) -- Otkritie Financial Corporation (FC) Bank’s acquisition of one of Russia’s largest insurers Rosgosstrakh triggered deterioration of the bank’s condition, Central Bank First Deputy Chairman Dmitry Tulin told reporters late on Tuesday.

The central bank appointed an interim administration at Otkritie FC Bank – one of Russia’s top-10 banks by assets – and said that it plans to become its main investor, using funds of the banking sector consolidation fund for its financial recovery.

In March, Otkritie FC Bank raised its stake in Rosgosstrakh to 19.8% from 4.4%, and in August the Federal Antimonopoly Service allowed the bank to buy 100% in the insurer.

“Rosgosstrakh is not the only reason for that, but it became some sort of a trigger that acted as a catalyst of the process…The banks’ spending to finance this event exceeded expectations of the owners of the Otkritie group significantly. The bank spent a significant part of its liquidity on this goal,” Tulin said.

The regulator’s Deputy Chairman Vasily Pozdyshev said that another problem of Otkritie was the bailout of National Bank Trust, which was launched in 2014 and on which Otkritie received a 127 billion ruble loan from the central bank.

“Another strategic weakness of the group is a not completely successful bailout of Bank Trust. In general, we have a case here of a bailout creating problems within the turnaround manager itself and within the financial recovery of Bank Trust,” he said.

He also said that there were no investors on the Russian banking market ready to bail out Otkritie FC Bank.

Tulin said that the regulator guarantees solvency of Otkritie FC Bank to its depositors and will support stability of the bank’s insurance business and its private pension funds, while Pozdyshev said that the authority has no plans to introduce a moratorium on fulfillment of creditor claims in the bank.

Tulin also said that the bailout of Otkritie FC Bank improves condition of the Russian banking sector as a whole, and that there will be no shocks in the sector in the foreseeable future.

The interim administration will have its hands full with working out corporate actions of the bank, but the central bank will assess capital of Otkritie FC Bank and publish it in one to three months, he said, adding that the authority expects credit ratings of Otkritie to soar in about six to nine months.

Pozdyshev also said that the process of financial recovery with the help of the banking sector consolidation fund instead of provision of a loan to another bank that would act as a turnaround manager is much more efficient and cheaper for the regulator.

A representative of the central bank told reporters separately that clients withdrew over 520 billion rubles from the bank from July 3 through August 24, with corporate clients withdrawing 389 billion rubles and individuals withdrawing 139 billion rubles.

Materials of the regulator also stated that Otkritie’s capital adequacy may fall below the threshold parameters of 5.125% and 2% as the interim administration may have to form additional reserves against possible losses and reevaluate the cost of the bank’s assets. The contraction will lead to a write-off or conversion into shares of subordinate liabilities of the bank.

After the financial recovery, the ownership of the current shareholders of Otkritie will not exceed 25%, the materials read.

Maxim Osadchy, director of the research department at Corporate Finance Bank, told PRIME that the capital gap of Otkritie FC Bank or the difference between assets and liabilities, may exceed 1 trillion rubles. This event is not insured, as the regulator did not impose a moratorium on fulfillment of claims of creditors, so the interim administration will not have to redeem a whopping 500 billion rubles to depositors, he said.

(58.5320 rubles – U.S. $1)

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