UniCredit Shows Interest in Rescued Russian Bank Otkritie

(Bloomberg) -- UniCredit SpA is interested in a potential takeover of rescued Russian lender Otkritie Bank FC, as Chief Executive Officer Andrea Orcel explores M&A opportunities to improve the group’s profitability.

UniCredit is set to start due diligence on the firm as soon as this week, according to people with knowledge of the matter. The Italian bank hired an adviser to examine the Moscow-based lender’s books and expects the review to be completed within weeks, the people said, asking not to be identified. 

Otkritie is a systemically-important Russian bank that was nationalized in 2017 as part of the country’s biggest-ever bailout after it collapsed under a pile of bad debt, much of it linked to its former owners. A deal would help Orcel -- a veteran banking deal-maker -- move past the complicated and ultimately unsuccessful negotiations with the Italian government to take over struggling local lender Banca Monte dei Paschi di Siena SpA last year. 

Bank of Russia, in response to a Bloomberg request for a comment, reiterated that several strategic investors have showed interest in participating in the sale process, without commenting on the companies involved. Reviewing proposals will take time given the complexity of a deal and an IPO remains one option for the central bank’s exit of Otkritie, it said.

A spokesman for UniCredit declined to comment. A spokesperson for Otkritie wasn’t available to comment.

UniCredit declined for a second day after the Bloomberg report. Shares were down 1.5% in Milan trading at 13.86 euros as of 11:04 a.m.

Any deal to expand UniCredit’s presence in Russia through a takeover of Otkritie would be greeted with caution and skepticism by investors due to the complicated political situation and the size of the potential transaction, analysts at Jefferies International Ltd said.

UniCredit has pledged to consider mergers and acquisitions provided they add shareholder value. The bank already has a substantial business in central and eastern Europe. In June, the supervisory board of Otkritie appointed Mikhail Alekseev as a new member. Alekseev was chairman of the management board of the Russian UniCredit Bank from 2008 to 2020.

Against Trend

Otkritie is present in the majority of Russia’s regions, with nearly 500 branches around the country, offering financial services to corporate, retail, SMEs and private banking clients.

UniCredit’s interest in expanding in Russia runs counter to a trend in recent years in which foreign lenders such as Deutsche Bank AG scaled back their local presence as Western sanctions and compliance risks weighed on their business.

UniCredit, which has more than 4,000 employees in Russia, generated 384 million euros of revenue in the country in the first 9 months of last year, according to a bank filing.

Otkritie is the seventh-biggest Russian bank, with over 3.3 trillion rubles ($44 billion) in assets, according to Banki.ru.

The Russian central bank, which owns Otkritie, said in August it began preparations for an initial public offering and was also considering selling the lender to a strategic investor. CEO Mikhail Zadornov, who is a former Russian finance minister, has said an IPO is the most likely option. 

Lenders including Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. declined to help the Russian central bank prepare a privatization plan for Otkritie because of the risks associated with the project outweighed potential fees, people familiar with the discussions said in 2020.

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