UPDATE 4: Cbank to bail out B&N Bank, sets no creditor demand moratorium

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MOSCOW, Sep 21 (PRIME) -- The central bank has decided to bail out Russia’s 11th largest bank B&N Bank and its affiliate Rost Bank, setting no moratorium on creditor demand fulfillment, the authority said in a statement on Thursday.

“In the framework of these measures, participation of the Central Bank of Russia as the main investor is planned with the use of money of the fund for banking sector consolidation,” the central bank said.

Interim administrations including employees of the central bank and of the banking sector consolidation fund were appointed at B&N Bank and Rost Bank.

The bank and its affiliates Rost Bank, B&N Bank digital and Uralprivatbank will continue to operate normally, fulfilling their liabilities and signing new deals. The central bank will be ensuring the continuity of their activities, it said.

The central bank decided to provide financial aid to B&N Bank to support its liquidity on Wednesday. Earlier that day, co-owner of B&N Bank Mikail Shishkhanov said that the bank was in active negotiations on its bailout with the central bank and admitted that the bank did not cope with troubles of its affiliates Rost Bank and MDM Bank.

Deputy Chairman of the central bank Vasily Pozdyshev said that a domino effect in the Russian banking sector is ruled out. “After the summer events (a newsletter by an analyst of Alfa Capital with a warning that four Russia’s key private banks saw troubles) a large number of banks reduced the number of interrelations,” Pozdyshev said. “As a result of these efforts, a domino effect is absolutely ruled out in my understanding. There is no risk.”

B&N Bank has a smaller liquidity deficit than bailed out earlier Otkritie Financial Corporation (FC) Bank, he said.

The outflow of household and corporate funds from B&N Bank amounted to 56 billion rubles in September, Pozdyshev said. “One third of it accounted for households with large deposits and two thirds for companies,” he said adding that the other banks in the group did not influence the liquidity situation at the bank significantly.

About 75% of assets of Rost Bank were loans to businesses of the B&N Bank owners, Pozdyshev said.

He also said that the share of the current shareholders of the bank, Mikhail Gutseriyev, Mikail Shishkhanov and organizations affiliated with them can fall to zero after a capital appraisal by the interim administration, in this case the banking sector consolidation fund will raise its stake in the banking group to 100%.

The owners could buy the bank back from the central bank later in case of a quality participation in its recovery, he said.

A source close to B&N Bank told PRIME that the stake of Shishkhanov is about 75% and of Gutseriyev about 25%. According to information available as of April 2015, Gutseriyev had invested 6 billion rubles in the bank and his stake was 39.4% and Shishkhanov owned 59.4%. According to Shishkhanov’s recent statements, he was selling assets to raise B&N Bank capital.

The financial recovery will take six to eight months, Pozdyshev said. The other financial assets of financial holding Safmar, uniting the assets of the Gutseriyev–Shishkhanov family do not need financial recovery procedures, he said. The central bank is in negotiations with the businessmen in order to return all industrial assets not pledged with other banks to control of B&N Bank.

Pozdyshev said that B&N Bank will have to form 250–350 billion rubles of additional reserves under a preliminary estimate.

He said that the central bank and B&N Bank owners have been discussing recovery measures since last autumn.

Shishkhanov told channel Rossiya 24 that the financial recovery of the bank will take three to eight months. “The process, I would not call it a bailout, it is rather recovery, these are different notions, the process itself (will take) from three to six to eight months. This is a serious process still.”

He said that some of the assets of B&N Bank can be sold in case of need. “The bank will be conducting its operating activities at top efficiency. If we need to sell we will sell, if we do not need we will not. The bank has many assets; perhaps, it is one of the most capitalized banks from the point of view of assets.”

According to Shishkhanov, market nervousness and rumors on the Internet that appeared after the central bank launched bailout of Otkritie Financial Corporation (FC) Bank were among the reasons of the current troubles in B&N Bank.

He also said that the development of Internet technologies caused a decrease of commercial real estate prices, which also caused issues in the bank.

Olga Ulyanova, senior credit expert at Moody’s, said that the bailout of B&N Bank and Rost Bank can prevent a significant liquidity outflow. “The bailout is a good piece of news for depositors and senior creditors of B&N Bank and banks in the group. At the same time, this measure will somewhat soothe depositors and senior creditors of other banks, preventing a significant liquidity outflow.”

Presidential spokesman Dmitry Peskov said that the central bank does not need to discuss its activities with the Kremlin. “The activities of the central bank require no discussion. The central bank fully controls the situation in terms of procurement of stability in the banking sector.”

Head of the Association of Russian Banks (ARB) Garegin Tosunyan told PRIME that the central bank has enough money to bail out even 20 large banks.

Deputy Finance Minister Alexei Moiseyev said that the ministry hopes to get back 8.8 billion rubles of OFZ government bonds that it gave B&N Bank to raise its capital in summer 2015.

(58.1290 rubles – U.S. $1)

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