Banks are taken over by mergers – Newspaper Kommersant No. 3 (7448) dated 11.01.
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Last year, the Bank of Russia withdrew the minimum number of licenses for at least the last ten years. In 2023, experts expect more activity from the regulator, but still, the reduction in the number of players will occur mainly due to mergers and acquisitions, and not due to forced or voluntary exit from the market, analysts are sure. Foreign players looking for ways out of Russia will play a significant role in this.
Last year, the Central Bank revoked only two licenses from banks and one from a non-bank credit institution. This is an anti-record since 2009, when the Bank of Russia revoked only two licenses. “Against the backdrop of the military operation, the Central Bank loosened its regulatory grip, plus the system has been greatly cleansed in recent years, including the accumulation of sufficient capital to meet the crisis,” says Dmitry Kurbatsky, managing partner of FG Dmitry Donskoy. In 2023, we expect about ten recalls, five self-liquidations and about 10-12 transactions (last year there were about 20-25) for the sale of banks. At the same time, in his opinion, profile players will be buyers of banks.
In general, experts share the forecast on license revocations. “We expect that the pace of license revocation will slightly increase, the Central Bank is gradually withdrawing from the regime of regulatory easing provided to the banking sector in 2022, and may increase pressure on loss-making and weak banks,” says Alexander Proklov, senior managing director of the NKR. “However, it is unlikely whether the pace of license revocation or surrender will return to what we saw a few years ago, since the main clearing of the market has already been completed.” Significant activation of license revocations of small banks in connection with violations of Federal Law 115 is also unlikely, the peak of license revocations on this basis may have already passed in the pre-Covid period, independent expert Alexei Nechaev points out. Nevertheless, there are still dozens of credit institutions in the sector with unsatisfactory indicators of operating efficiency and profitability, without a specific business model, with questionable asset quality, says Yuri Belikov, Managing Director of Expert RA. According to him, it has become extremely difficult to predict regulatory activity to withdraw players from the market starting from 2020. At the same time, it is logical to assume that forced withdrawals will not become much more frequent, so as not to provoke an additional decrease in confidence in the banking system, local outbursts of panic among depositors and similar events, the expert concludes.
Voluntary surrender of licenses also seems unlikely to experts. In 2022, they “were single, and the reason for this is also global uncertainty,” says Yuri Belikov. “In some cases, even realizing the unprofitability and futility of their banking business, the beneficiaries did not decide to curtail it, because they did not see the optimal and reliable directions for the relocation of capital in the economy,” he notes. In general, such uncertainty will persist in 2023, the expert believes. “There were very few precedents for the voluntary surrender of a license in past years. However, there are no prerequisites for increasing their number even now, even if we mean the “subsidiaries” of foreign banks, for which this is unlikely to be a rational decision, Mr. Nechaev believes. Most likely, they will continue to take a wait-and-see attitude, unless extreme sanctions pressure that will force them to flee the Russian market.”
Thus, according to experts’ forecasts, in 2023 takeovers in terms of frequency may overtake reviews and cancellations of licenses. According to economist and independent financial expert Nadezhda Gromova, banks with foreign participation will have a special fate. Banks from hostile countries are likely to either leave on their own, if they do not occupy a sufficiently large market share, or will be bought out. “It will be primarily large state-owned banks that will absorb other players. Sometimes it can be for them an alternative way of the necessary additional capitalization,” Mr. Belikov is sure. “Market participants will continue to engage in dialogue on the purchase of a number of banks with foreign participation, while prices for such banks have increased significantly over the past six months from 0.2-0.4 to 0.6-0.8 capital, taking into account the recovery of the sector and indicators of the third— Q4, which makes these assets less interesting, Dmitry Kurbatsky believes. .8 capital”.
At the same time, Yuri Belikov recalls, any transactions with the capital of large foreign banks will be carefully administered. “And the scale of their business could mean significant losses for controlling foreign groups if they decide to sell the bank at a discount,” he adds.
In general, according to independent expert Andrei Barkhota, the number of credit institutions involved in mergers and acquisitions may amount to 5–15% of the total number of operating institutions in 2023. “This year, the total number of such transactions may exceed ten, of which at least two or three will be for credit institutions with a capital of at least 50 billion rubles,” he believes. “Multipliers for M&A transactions will be in the range of 0.2– 0.7 capital”. At the same time, since the sale of foreign banks is hampered by the complexities of the transaction approval procedure, “there is a high probability that the largest foreign banks will not change their owner in 2023, but will demonstrate miracles of efficiency, optimizing costs,” concludes Mr. Barhota.
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