UPDATE4: Russian Post to buy 50% in Leto Bank for 5.5 bln rbl

(Adds details in paragraphs 5, 10)

MOSCOW, Jan 28 (PRIME) -- Russian Post will pay 5.5 billion rubles for 50% minus one share in Leto Bank, a unit of VTB 24, on which the Post bank will be based, VTB 24 CEO Mikhail Zadornov said in a news conference Thursday.

“Russian Post and VTB 24 on Thursday signed a package of documents to establish the Post bank. Russian Post, its affiliate Pochtovye Finansy (Postal Finance), will receive 50% minus one share in Leto Bank for about 5.5 billion rubles. We will further jointly contribute investments,” Zadornov said.

Dmitry Rudenko, CEO of Leto Bank and Post Bank, said the bank may receive a combined profit of 67 billion rubles in first eight years of its existence, but will transfer 47 billion rubles of the profit to Russian Post until 2023 as an infrastructural payment. The transfer in 2016 will stand at less than 1 billion rubles, he added.

The bank will initially launch operations in Moscow, the Moscow Region, and St. Petersburg and may open more than projected 15,000 of branches in eight years, depending on post employees’ readiness to sell banking products and on Russian Post’s infrastructure. The supervisory board will revise the business plan every year, he said.

At first, Post Bank will make money on credits of Leto Bank, but in several years it may start to return money and fund other banks of the VTB Group. By the end of 2023, Post Bank plans to have a credit portfolio of more than 400 billion rubles and a deposit portfolio of more than 600 billion rubles, Rudenko added.

Zadornov also said that VTB group’s investments in the project will stand at about 16–20 billion rubles in 2016, he added.

But VTB 24 does not expect the deal to increase its costs in 2016. “Our spending on the Post bank will fall this year, as we have been providing financial help to Leto Bank for the past three years. First, now we will inject money (into the Post bank together with Russian Post), and second, the Post bank has switched to profit, so our expenditures on the project are falling,” he said.

“We expect that first clients will be able to come to Russian Post’s office and receive services of the Post bank in March,” he said, adding that the bank will provide basic services of opening an account or deposit and issuing a bank card.

The Post bank may carry out an initial public offering (IPO) in the long run. VTB 24 wants to receive good money at the IPO, and Russian Post should be reincorporated as a joint stock company before the bank can float its shares.

Russian Post’s CEO Dmitry Strashnov said that there are no plans to attract an investor to Post Bank as VTB and Russian Post have a self-sufficient partnership. “There is competence on the part of the VTB Group and a network on the part of the Russian Post,” he said.

The Federal Antimonopoly Service approved the deal on Monday.

The bank’s project envisages launches of more than 20,000 banking windows in 15,000 post offices, including 6,500 banking windows to be launched in 3,500 post offices in 2016.

(78.9969 rubles – U.S. $1)

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