RCB sells 20% stake to Otkritie FC Bank
RCB Bank Ltd., the Limassol-based ‘systemic’ bank that passed the recent ECB capital strength tests with flying colours, has raised $124.2 mln in fresh equity by selling a 19.85% stake to Otkritie Financial Corporation Bank, the second largest privately owned and sixth largest bank in Russia.
After the deal, Russia’s VTB Group has reduced its stake to 46.29% and RCB Bank is no longer a subsidiary bank, even though VTB also maintains a minority stake in the parent Otkritie Holding. Since 1997, Otkritie has also had a presence in Cyprus through its financial services and brokerage firm, Otkritie Finance (Cyprus) Limited.
The new deal has boosted RCB’s assets to over $9 bln with first-half profits at $36 mln and equity exceeding $500 mln.
“Prior to the capital increase, RCB Bank Ltd. successfully passed the European Central Bank’s stress tests exceeding by almost twice the minimum requirements.,” said the bank’s CEO Kirill Zimarin.
“However, our development plans on the local and international markets imply an active assets growth, which required both the expansion of the capital base and the number of strategic partners,” Zimarin said in a statement.
“Our new shareholders have extensive expertise in developing lending projects for small and medium-sized businesses, as well as in the successful implementation of retail projects and high-quality investment banking services. The attraction of Otkritie FC Bank into the equity of RCB Bank Ltd. will undoubtedly contribute to the further development of Cyprus as an international financial centre in Europe, and will also provide an additional impulse to RCB Bank’s dynamic growth”, Zimarin added.
Established in 1995 initially as Russian Commercial Bank Cyprus, mainly to serve VTB Group’s interests, RCB Bank operates branches in Nicosia, Limassol and Luxembourg.
Last week, Moody’s Investors Service upgraded RCB Bank’s deposit ratings to Caa1 from Caa2 with a ‘stable’ outlook, following the rating agency’s upgrade of the Cyprus’ government bond rating to B3 from Caa3 and the subsequent raising of Moody’s deposit ceiling in Cyprus to Caa1 from Caa2.
Moody’s said its upgrade of RCB deposit ratings reflects the raising of the country deposit ceiling, which previously constrained RCB’s ratings, and RCB’s strong regulatory capital buffers and stable funding profile, balanced against its limited domestic franchise.
This, the rating agency had said, reflects both RCB’s dependence on its parent bank, Russian Bank VTB, JSC and VTB’s intention to reduce its stake in RCB, formerly Russian Commercial Bank.
VTB currently originates, funds and guarantees the majority of RCB’s loans, in addition to maintaining a high level of oversight, Moody’s said.
Furthermore, despite this strong linkage with VTB, the rating agency also considers that this association will likely weaken going forward, in light of both VTB’s planned divestment from RCB Bank through a capital increase, which will decrease its stake to 46.29% from 60% currently, as well as the 38% contraction in RCB Bank’s balance sheet in 2013.
As of December 2013, the bank reported a Tier 1 ratio of 16.78%, more than twice the minimum requirements, which enabled it to pass the European Central Bank’s comprehensive assessment with flying colours. Cash collateral also improves the bank’s asset quality with impaired loans accounting for 0.53% of gross loans. RCB Bank’s funding and liquidity profiles also benefit from stable funding provided by Bank VTB.
Moody’s said upward pressure on the bank’s deposit ratings could develop if the deposit ceiling in Cyprus is further raised. Over the longer term, positive pressure could develop on RCB Bank’s BCA if the bank strengthens its franchise outside the VTB group while maintaining its strong financial profile.
“We are satisfied with the results. Success in passing the stress tests demonstrates that RCB Bank has retained stability and is a reliable partner for its clients. The availability of significant capital reserves will enable the bank to implement its plans on international business development, as well as to boost its lending to Cypriot companies and expand its business in Cyprus,” Zimarin had said after the stress test results.