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Friday, Feb. 15, 2002. Page 5
Vladimir Potanin's giant holding company Interros is merging its financial arms Rosbank and the MFK investment house in order to challenge bigger competitors.
"The consolidation is aimed at strengthening Rosbank's and MFK's position on the banking and investment market by means of creating a unified financial institution capable of competing with leading Russian and foreign banks," the two banks said in a statement Thursday.
The company said the decision to pull MFK into Rosbank was made by shareholders at the end of last year and that the merger plan would be finalized at the annual shareholders' meetings scheduled for early summer.
Rosbank is the seventh-largest bank in the country, according to Interfax Rating Agency. As of Jan. 1, the bank had assets of 66.5 billion rubles ($2.15 billion) and 7.4 billion rubles of its own capital. MFK, or Mezhdunarodnaya Finansovaya Kompaniya (International Financial Co.), is the 41st largest bank with 6.1 billion rubles in assets and No. 28 in terms of capital, with 2.3 billion rubles.
Rosbank chief Yevgeny Ivanov will lead the new Rosbank, while current MFK president Mikhail Zaitsev will serve as his deputy.
The merger is the second in Rosbank's history. In 2000, Rosbank absorbed Uneximbank. MFK, which celebrated its 10th birthday Thursday, was one of the first bricks Potanin laid in the foundation of his empire, which includes metals giant Norilsk Nickel.
The new Rosbank will remain Russia's No. 7 bank.
The companies said the merger is aimed at optimizing the financial arms of Interros by means of cost-cutting and boosting Rosbank's size to give it larger freedom and safety.
Initially, Rosbank served primarily as a financial agent to its parent holding, while MFK was streamlined into an investment house. However, both institutions ended up having both functions, making the merger an obvious move, said Mikhail Matovnikov, deputy director general of Interfax Rating Agency.
"Bank holdings are out of fashion. ... If [a company] has more than one bank, structures become less transparent, which leads to more bridges and less trust in the eyes of investors for each and all of the holding's banks," Matovnikov said.
The merger also follows the holding company's more general strategy of consolidating its core businesses, namely Norilsk Nickel, said Andrei Ivanov, an analyst at Troika Dialog.
It is not clear yet, however, which of two major options in terms of strategy Interros will chose for the new Rosbank, Ivanov said. It can pursue capitalization growth and attempt to make business profitable and interesting for external investors, or use Rosbank as an instrument to float debt on foreign markets -- a tactic used by Uneximbank in 1997.
"The exact strategy will become clear within a year," Ivanov said.
Analysts, however, while generally anticipating a wave of mergers and acquisitions in the sector, said the Rosbank consolidation was not a trigger. Such mergers are likely to occur only within holdings that have more than one financial arm. The much-anticipated real restructuring of the banking system, meanwhile, will begin only when owners start to treat their banks as independent and potentially profitable businesses, rather than organizations designed to serve mostly shareholders, Ivanov said.
The major change in the banking sector will occur if and when the Central Bank initiates the necessary legal amendments that currently make bank acquisitions a very slow and bureaucratic process, Ivanov said.