Barclays faces large loss in Russian exit

• Expobank to be sold in decision to exit retail banking in Russia • Move part of Diamond’s strategy to sell underperforming units • Sale expected to make a tenth of 2008 £373m purchase price Barclays is expected to record a multimillion-pound loss as it prepares to draw up a shortlist of potential bidders for the Expobank business it bought in Russia just before the 2008 banking crisis. Bob Diamond, the Barclays boss, was quick to identify Expobank as a business that needed to be disposed of after he took the helm late last year and announced the decision to pull out of retail and commercial banking in Russia in February. A sales process is now under way and sources believe that Barclays will have to sell the operation for as little as a tenth of the £373m that it paid for the 32-branch operation in March 2008 . Among those thought to be potential bidders are the local banks Vostochny Express and the largest Kazakh bank, Kazkommertsbank. High-street banking in Russia – rather than investment banking – has proved difficult for UK banks to crack. HSBC sold its retail business to Citi of the US in June barely two years after trying to break into the market. Foreign entrants face many state-owned competitors – particularly Sberbank and VTB – which exacerbates the problems they face in winning business. Citi is one of the foreign banks to have managed to break into the market. When Barclays, which refused to comment, announced the Expo deal, it had not expected the acquisition to start boosting its overall earnings until 2011. Focused on Moscow, St Petersburg and other parts of western Russia, Expobank was owned by Petropavlovsk Finance until Barclays stepped in. The acquisition was led by Frits Seegers, who was head of global and retail banking for Barclays but has since left the bank. At the time, Seegers had described the bank as “well run” and a local expert, Nikolai Tsekhomsky, former VTB Group finance director, was brought in to speed up growth in the business, which employs about 1,500 people. While Diamond will be keen to demonstrate that he is executing his strategy to pull out of underperforming businesses when he presents the bank’s interim results on 2 August, it is unlikely that he will be able to name a buyer for the operation by then. He told the City that he had embarked on a “rigorous and continuous review” of the group’s business as he attempts to improve the return to shareholders despite being required to hold more capital to support its existing operations. The bank’s return on equity was 7.3% in 2010, while Diamond wants it to hit 13% to 15%. The Barclays investment banking arm, Barclays Capital, will continue to look for business in Russia from big companies and multinationals as well as governments. HSBC is also planning to retain an investment banking presence in the country. Barclays Banking Russia Europe Jill Treanor guardian.co.uk

Posted by on July 18, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.