KOMMERSANT. Igor Kim’s pullout of MDM Bank’s capital has passed into the official execution of the arrangements, Kommersant business daily writes on Monday. The bank’s board approved the alienation of its subsidiary, Latvian Trade Bank (LTB), that, according to the paper’s source, will be assigned to Igor Kim in exchange for MDM Bank shares.
“The deal has been approved by the board, as a matter of fact assigning the Latvian subsidiary to Kim in exchange for his shares is a settled issue,“ said the newspaper’s source close to the negotiations. “This is an extremely structured deal, the acquisition is carried out through MDM Bank shares,” another source close to the deal said. Igor Kim declined to comment.
MDM Bank was established through a merger of MDM Bank-Bank (does not exist at the moment) and URSA Bank in 2009. Control over the merged bank went to Sergey Popov (56.3% of the voting shares), while the second largest equity position is held by former URSA Bank beneficial owner Igor Kim (11%).
MDM Bank’s performance, as market players think, fell short of the major shareholder’s expectations. Since 2010 Igor Kim has been taking measures to pull out of this project: to begin with, he left his seat of the management board chairman at MDM Bank and later left the board. To date, not a single person fr om his team that initially formed a majority holds office at MDM Bank’s management board. Swapping MDM Bank shares for the Latvian subsidiary’s ones is Kim’s first step to exit from the bank’s capital.
It is unknown which portion of his 11% equity stake in MDM Bank Kim will exchange for 100% of Latvian Trade Bank. “According to the Central Bank of Russia, as of November 1, 2011 MDM Bank’s capital stood at Rub 44.3 bln, that of Latvian Trade Bank amounted to around Rub 2.8 bln. In case of the stock swap Kim could sell roughly 6.2% of MDM Bank shares to pay for 100% of LTB,“ calculates Maxim Tishchenko, head of assessment at Crowe Horwath RBS. “Latvian Trade Bank’s capitalization could reach 1.5x of capital,” specifies Alexander Artemiev, partner at Berkshire Advisory Group, adding the Latvian bank has virtually no bad debt. The point is that until now LTB has not engaged in lending and specialized on FX operations, said Roman Keningsberg, deputy director of the banking audit department at FBK.
Later Kim will cut his equity position in MDM Bank to zero, the bank will buy his shares by the end of the month and later they will be redistributed among the rest of shareholders, the newspaper’s source close to the bank’s shareholders specified. “The price at which the rest of Kim’s shares will be bought will depend on results of an inspection that the Bank of Russia is performing at the bank: whether or not the bank will have to form additional reserves after the inspection, the amount of which will influence the capital," the newspaper’s respondent said.
Latvian Trade Bank could become a core of Igor Kim’s new banking project, experts think. “LTB is a mid-sized player, but it could turn into a good foothold to expand business in Europe wh not so many banks without bad assets on balance sheets are available for acquisition at the moment," said Robert Idelson, management board chairman at M2M Private Bank.
