VTB’s $4.7bn deal for Otkritie Bank

March 2023 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

March 2023 Issue

The Bank of Russia has agreed to sell Otkritie Bank to the country’s number two lender, state-owned VTB Bank, in a deal worth $4.7bn.

Under the terms of the deal, which was closed in just a matter of days in December, VTB paid 233bn roubles in cash and the remainder in OFZ treasury bonds, the central bank said.

Russia’s central bank had taken over Otkritie, once one of the country’s biggest private banks, amid a crisis in the private banking sector in August 2017, through an $8bn rescue plan as part of a years-long campaign to clean up Russia’s banking sector. Otkritie was bailed out by the central bank after it crashed due to bad debt and since then the Bank of Russia has been looking to divest its stake via a public offering or sale.

“This deal will ensure the development of the banking sector without the involvement of the central bank as owner,” said Elvira Nabiullina, governor of the Bank of Russia. Ms Nabiullina had previously noted the central bank’s willingness to sell Otkritie, noting that it was not normal for the regulator to also own a bank.

Otkritie is believed to have approximately 500 locations operating throughout Russia and serving retail, small- and medium-sized enterprises (SMEs), and corporate and individual clients.

Both VTB and Otkritie have faced Western sanctions imposed in response to the Russian invasion of Ukraine. In January 2022, Italian financial group UniCredit had expressed interest in purchasing Otkritie but later withdrew its offer due to the situation in Ukraine. Both VTB and Otkritie were among a group of Russian banks delisted from the Swift financial network by the European Union in March 2022.

Following the sale, VTB said nothing would change for Otkritie clients in the near future and that it would develop a plan to integrate Otkritie’s business. “Independent assessor DRT assessed (Otkritie’s shares’) market value in the range of 328-374bn roubles,” the central bank said, adding that its bail out investment was 555bn roubles and that the deal, taking into account dividends, would give it a refund of 352bn roubles.

VTB also noted that Mikhail Zadornov, president of Otkritie, would leave the company on 1 January 2023, with Mikhail Alekseev, former chairman of UniCredit Bank Russia, nominated in his stead.

The Russian government had been considering draft legislation that would give the banks and the regulator until the end of 2023 to complete the deal without needing to hold a competitive tender or seek approval from Russia’s competition authorities. Parliament had set a year-end 2022 deadline for the deal when it approved legislation in March of that year to help it pass with minimum bureaucracy.

Otkritie Bank is a universal credit and financial organisation developing corporate and investment businesses. Until the sale to VTB, the sole shareholder of Otkritie Bank was the Bank of Russia with a 100 percent stake.

VTB Group is a Russian financial group comprising more than 20 credit and financial companies operating in all major segments of the financial market. In the CIS countries, the group is represented in Armenia, Ukraine, Belarus, Kazakhstan and Azerbaijan. VTB banks in Austria, Germany and France operate under a European subholding headed by VTB Bank (Austria). In addition, the group has subsidiaries and associated banks in the UK, Cyprus, Serbia, Georgia and Angola, as well as one branch of VTB Bank in China and India, and two branches of VTB Capital Plc. in Singapore and Dubai.

Richard Summerfield