The owners of Russia's Nomos Bank (NMOS.MM) (NMOSq.L) and Otkritie Bank are in talks to merge their businesses in a deal that would create the country's second-largest private lender by assets, a source close to the talks said on Tuesday.
Russia's banking industry is dominated by two state-controlled giants Sberbank (SBER.MM) and VTB (VTBR.MM), and a long tail of smaller players, widely seen as needing to merge to strengthen and compete.
A merger of Nomos and Otkritie would create a bank with combined assets of 608 billion roubles ($18.7 billion), putting it second to Alfa Bank, part of oil-to-retail tycoon Mikhail Fridman's empire and whose assets stood at 913 billion roubles as of April 1, according to Interfax.
But the combined bank would still be significantly smaller than the state giants - Alfa's balance sheet is just one-twelfth the size of that of market leader and Europe's No.2 lender Sberbank.
The source added that the talks are likely to have "a positive ending" but declined to give any other details.
Nomos and Otkritie declined to comment.
As of the end of the first quarter, Nomos' assets were up 0.8 percent to 455 billion roubles, while Otkritie's assets were down by 8 percent to 153 billion roubles, according to Interfax data.
"If Nomos simply buys a stake in Otkritie, there would be speculation of further additional capital to be raised as Nomos will also probably acquire 44 percent in Bank Khanty-Mansyisk (BKM) in September," Uralsib analysts wrote in a research note.
Nomos, which paid 12.1 billion roubles for a 51 percent stake in BKM in 2010, has been reported to be seeking to raise up to $600 million via a share sale to finance the purchase of the remaining stake when markets improve.
However, Uralsib analysts said they believed Nomos could merge with Otkritie "in a way that would avoid putting immediate pressure on its capital."
As of end of the first quarter, privately-owned Nomos remained well-capitalized with a Tier 1 capital adequacy ratio at 12.8 percent.
Otkritie Bank is majority-owned by Otkritie Financial Corp, which is owned by its directors, VTB and minority shareholder Anatoly Chubais, the architect of Russia's post-Soviet privatizations.
The Deposit Insurance Agency, Russia's equivalent of the U.S. Federal Deposit Insurance Corporation, also owns 24 percent of Otkritie and would be likely to seek a buyer for its stake, say analysts. The International Finance Corp. owns 14 percent.
Nomos bank is part-owned by Czech private equity firm PPF. Russian businessman Alexander Nesis, who also owns a stake in Polymetal (PMTL.MM), is also a shareholder.
This article is copyrighted by Reuters
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