IPO-candidate Credit Bank of Moscow eyes higher retail lending

Thu Mar 13, 2014 10:20am EDT

* Bank considering IPO among other options for raising capital

* Seeks to raise retail lending

* Sees resilience in Moscow market where it is focused

By Megan Davies

MOSCOW, March 13 (Reuters) - Credit Bank of Moscow, which is contemplating a possible London initial public offering, is aiming to increase the proportion of retail loans in its portfolio betting on the capital's resilience to Russia's spluttering growth.

Russia's economic growth slowed to 1.3 percent last year and events in Ukraine - where Russian forces have seized Crimea prompting Western calls for sanctions - could knock it further, causing lasting damage and pushing it into recession. [ID nL6N0M02R2]

Credit Bank of Moscow, No. 13 in Russia by assets according to Interfax data, has a loan portfolio made up of 70 percent corporate loans and 30 percent retail. The retail loans part has grown 5 percentage points from a year ago and the bank aims for it to increase to 40 percent in the coming three-to-four years.

"The retail portion is growing, which is part of the strategy," Vladimir Chubar, chairman of the management board, told Reuters. "Next year we want to spend more time on the retail side."

The bank is considering several options to raise capital to grow the business, including a direct injection from existing shareholders, raising debt or conducting an IPO, he said. In the case of an IPO, the majority of shares sold would be in the form of primary shares, or new shares, for the company.

Preparations for an IPO are already advanced with Citi, Morgan Stanley and Sberbank organising the potential $500 million offering, a source familiar with the situation previously said. [ID nL6N0JZ2ZN]

However, the Ukraine crisis has meant transactions such as IPOs are on hold. A source familiar with the deal said the company was still considering an IPO this year but it would be difficult to get anything done in the current environment or second quarter. [ID nL2N0MA0AC]

German retailer Metro's plan for an imminent stock market listing of a stake in its Russian wholesale business is under threat, sources previously said. Shares in recently listed Russian hypermarket chain Lenta have fallen around 10 percent since their recent IPO. [ID nL6N0M01C0]

MOSCOW CONCENTRATION

The bank, majority owned by Russian businessman Roman Avdeev who is worth $1.4 billion according to Forbes magazine, relies mainly on its corporate client base to gain retail clients such as the clients' employees.

"The Moscow concentration is helping us because of the low unemployment rate," said Chubar, who added that he was not concerned about a credit bubble or a slowdown.

"We are only focused on Moscow (and the Moscow region). We see enough growth in (and around) Moscow."

Credit Bank of Moscow is also aiming to double its 5,000-strong payment terminals business, which allow people to pay bills via stand-alone machines, to around 10,000 in the next two-to-three years.

"For us, payment terminals have three (advantages) - service for clients, risk management ... and fees," said Chubar. "The transactional data (can be used to) protect our retail loan book from NPLs (as we use them to gather) data about the customer."

Non-performing loans (NPLs) amounted to 1.3 percent of its loans in 2013 versus 1 percent the prior year, reflecting the higher portion of retail loans held by the bank.

The company on Wednesday reported net income for 2013 which increased 54 percent to 8.9 billion roubles ($244 million), driven by higher net interest income which was helped by a 54 percent growth in its gross loan portfolio.

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