Sanitation of twenty years of exposure – Newspaper Kommersant No. 11 (7456) of 01/23/2023

As part of the deal to sell SMP Bank to Promsvyazbank (PSB), the reorganization of Mosoblbank will last another ten years, until 2042. An increase in terms is equivalent to injecting money into capital and saves PSB funds, according to preliminary estimates – about 100 billion rubles. The funds, experts believe, are required to cover the capital deficit of Mosoblbank, which could grow at the beginning of last year against the backdrop of falling prices for Eurobonds, which occupied a significant part of the bank’s assets.

On the extension of the rehabilitation of Mosoblbank, which was bought out by PSB together with SMP Bank (see “Kommersant” dated December 30, 2022), told three sources of Kommersant familiar with the situation.

According to two interlocutors of Kommersant, the recovery will last until 2042. Until that time, Mosoblbank will remain an independent legal entity, while SMP-Bank can be integrated into PSB within one and a half to two years.

The PSB did not confirm, but did not deny this information either. They assured that the deal “will not have a negative impact on the bank’s regulatory financial performance.” “The parameters of the financial recovery plan for Mosoblbank, which is part of the SMP Bank group, take into account the interests of PSB. PSB has extensive experience in banking M&A, participating only in those transactions, the conditions of which contribute to the growth of both our business and financial performance,” emphasized PSB there. The Central Bank did not answer Kommersant’s request. The DIA declined to comment.

According to Kommersant’s sources, the Central Bank also agreed to extend the sanation period, although “traditionally, the regulator is intractable in these matters.” Prolongation is a rarity and “speaks of an individual approach,” bankers say. Known cases – the extension of the rehabilitation period for the bank “Russian Capital” (now “Dom.RF”) in 2018 until 2025, completed ahead of schedule, and in the same year – the term of the deposit to Krayinvestbank for five years.

Extending the term is “the only free option to work off the growth of a hole in capital,” says one of the bankers, otherwise you would have to invest more money.

According to the latest data, in the first quarter of 2022, the negative capital of Mosoblbank increased by 83.3 billion rubles. (38.1%), up to 218.55 billion rubles. The bank then did not disclose the information.

Now the funds received for recovery at 0.51% per annum can be used for an additional ten years. This will allow one-time income to be recognized in IFRS statements, explains one of the experts in the banking market. According to him, the effect could be about 103 billion rubles, based on the zero-coupon yield of ten-year government bonds (10.5% per annum), taking into account its discounting (loan yield 0.51% per annum). Unlike IFRS, in reporting under RAS, the profit for the use of funds will be stretched for the entire period during which the bank will be able to earn interest income, the interlocutor of Kommersant explained.

It was not possible to find out which transactions and assets could lead to an increase in the negative capital of Mosoblbank without up-to-date reporting. Kommersant’s source in one of the banks admits that in March last year the bank could have problems due to falling prices for Eurobonds (however, this was typical for all market participants).

Mosoblbank invested part of the money in Eurobonds received from the DIA back in 2014 (see “Kommersant” dated October 13, 2014). According to the reporting under RAS, according to the results of the third quarter of 2021, the bank’s assets in the amount of about 110 billion rubles. were invested in non-resident bonds issued by SPV companies. Among them, the bank named VTB Eurasia DAC, VEB Finance plc, Gaz Finance Plc., Rusal Capital DAC Another 12.7 billion rubles. was invested in bonds of a non-resident bank (an OECD member country).

After a precipitous fall in the market in late February – early March last year (see “Kommersant” dated March 3, 2022) the bank could have an open foreign exchange position (OCP), that is, liabilities on foreign exchange instruments exceeded the foreign exchange collateral for them. Perhaps, one of the interlocutors of Kommersant notes, the bank forcibly closed the ORP, fixing a “strong minus”.

Olga Sherunkova