Ural Siberian deal puts NIKoil at forefront of banking consolidation

A key deal in this trend is NIKoil Financial Corporation’s recent acquisition of a controlling 75% stake in Ural Siberian Bank, the country’s 10th largest bank with a nationwide network and assets of almost $1.5bn, as at the end of 2002.

NIKoil Financial, which is not a bank, has equity capital of $600m and has become a prime player in Russia’s financial markets with involvement in investment, banking and insurance. It controls more than 70% of the Russian factoring market and manages about 50% of the assets of all mutual funds in Russia, with about 80,000 investors.

However, the company already also owns two other major banks, Avtobank, a medium-sized retail bank acquired in 2002, and IBG NIKoil Bank, the 13th largest bank in the country, which is active in precious metals, international markets and equity brokerage. Together the three banks had combined assets of close to $3bn at the end of 2002.

NIKoil Financial has built up its stake in Ural Siberian over recent years and acquired its controlling stake in April for an undisclosed sum. Maarten Pronk, acting chairman of IBG NIKoil, said the three banks would be integrated into one institution within two years thus making a considerably larger bank.

The bank announced that its products are to be standardised but Mr Pronk said that no decision has been made yet on whether branding of the institutions will be unified.

Mr Pronk believes this is a critical time in the evolution of the Russian banking sector: “Consolidation is happening fast, now you can see the Top Five banks of the future being formed, in 10 years time you will look back and see that now is when the major consolidation began.”

With President Vladimir Putin now emphasising banking reform in his second term and the giant Sberbank gradually losing its domination of the retail market, there are significant opportunities for nimble banks to developnew markets and expand their market share.