UPDATE 1-Belgium's KBC eyes sale of Russian bank to pension fund

Tue Nov 27, 2012 8:17am EST

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MOSCOW Nov 27 (Reuters) - A pension fund owned by Russia's rail monopoly could buy Russia's Absolut bank from Belgian financial group KBC, which is selling assets as part of a drive to win regulators' support for state aid.

The pension fund, Blagosostoyanie, received an approach from KBC to take part in the sale process, its executive director Yuri Novozhilov told Reuters on Tuesday, adding he did not know if KBC had selected a winner.

Russian business newspaper Vedomosti quoted several sources as saying Absolut could be valued at between 10 billion roubles and 12 billion roubles ($322 million-$387 million), which would be a significant discount to the price paid by KBC in 2007.

KBC bought Absolut for around $1 billion, or about four times its book value. It is now selling the bank as part of a series of disposals required to win approval from European regulators for 7 billion euros ($9 billion) of state aid it received at the height of the financial crisis.

"The process of trying to sell Absolut is ongoing and, while it is, we are bound by confidentiality," a KBC spokeswoman said. Absolut declined to comment.

KBC has made all of the main divestments it agreed with regulators, but still needs to sell some smaller units such as Absolut. Absolut is Russia's No.47 bank by assets, according to Interfax news agency data. Its capital stood at around 18 billion roubles in the third quarter.

The price reported by Vedomosti values Absolut at 0.5-0.6 of its book value, analysts at Raiffeisen said in a research note.

Russian banker Igor Kim was seen as a likely buyer of Absolut. However, a source close to Kim said he dropped out the race last week after Blagosostoyanie made a higher bid.

Kim could not be reached for a comment.

A sale of Absolut would mark another exit of a foreign bank from Russia. Britain's Barclays and HSBC, as well as Spain's Santander, have either scaled down or shut their operations in the country, under pressure to cut costs amid jittery financial markets, tougher regulations and growing competition from Russian banks.

($1=31.0140 Russian roubles) (Reporting by Katya Golubkova in Moscow, Philip Blenkinsop in Brussels and Oksana Kobzeva in London; Writing by Megan Davies and Katya Golubkova; Editing by Mike Nesbit and Mark Potter)

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