Russian state-owned banking giant VTB Group is to buy leading consumer loans specialist Home Credit and Finance Bank, bne sources have revealed.
The Central and Eastern European consumer finance group Home Credit has confirmed bne's earlier story that it will sell its operations in the Russian-speaking countries to Russia's state-owned VTB Group. Details will follow later today when Home Credit releases an official statement.
A spokesperson for VTB said earlier that it wouldn't comment on rumours.
Home Credit and Finance Bank is the second biggest consumer loans operation in Russia after Russky Standart and has been a huge success. However, Home Credit's owner, Czech billionaire Petr Kellner's PPF Group, is looking to sell 100% of the bank to VTB, as well as its operations in Belarus and Kazakhstan, though not those in Ukraine, which have been wound down since the crisis and only now hold some deposits, say bne sources.
VTB has been actively building up its franchise both at home and abroad through acquisitions. It is the second largest bank in Russia in terms of assets after Sberbank, but until now has largely concentrated on corporate banking activities. However, following the 2004 mini-bank crisis in Russia, it picked up the retail bank Guta and used it as a platform to launch its retail arm VTB-24, which won bne's inaugural "Best Bank in Russia" award in October on account of its fast growth over the last few years.
Still, VTB-24 remains small compared to Sberbank's vast retail network that dwarfs all its rivals, but the acquisition of Home Credit will seriously increase VTB Group's clout in the fast growing retail segment. Home Credit launched its operations in the Russian market in 2002 with the acquisition of Innovation Bank Technopolis. Home Credit and Finance Bank is now one of market leaders in consumer finance in Russia, offering consumer loans through points of sales outlets as well as providing lending and other retail banking products through its branches. In the point of sale segment it holds the number one position with almost 27% of market share and a 6.2% market share in the credit cards segment. It is very profitable. In the first half of this year, its net profit soared to RUB5.121bn (?121m), significantly exceeding the result from the same period last year of RUB920m; its return on equity in the period was 35.6%.
Sources have been telling bne for some time now that Kellner has come up against mounting obstacles to doing business in Russia. One source says Kellner has been pressured to sell by the Kremlin. At the same time, Kellner is looking to expand Home Credit's operations into countries as far afield as India and Indonesia, as well as launch a new bank in the Czech Republic. "Three years ago, prior to the financial crisis, PPF said the Czech Republic was too small for their business strategy and instead they would focus on larger markets. Now the crisis, coupled with mounting obstructions to doing business in markets such as Russia, has tied up a lot of capital and Petr Kellner is being forced to reconsolidate his business activities on friendly home turf in order to raise much-needed cash flow," a source familiar with PPF told bne.