(Bloomberg) —
Any deal to expand UniCredit SpA’s presence in Russia through a takeover of Otkritie Bank FC 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.
The Milan-based bank is exploring the possibility of acquiring the rescued Otkritie, one of the top 10 lenders in Russia, and will start due diligence as soon as this week, Bloomberg News reported Tuesday. The Moscow-based bank was nationalized in 2017 as part of the country’s biggest-ever bailout.
Read More: UniCredit Is Said to Show Interest in Russian Bank Otkritie
“With loans of 24 billion euros ($27 billion), Otkritie appears to be around three times the size of UniCredit’s existing Russian business and would be equivalent to about 5% of group assets,” Benjie Creelan-Sandford and Marco Nicolai wrote in a note to clients.
UniCredit already has a substantial business in central and eastern Europe, and has more than 4,000 employees in Russia. The lender generated 384 million euros of revenue in the country in the first 9 months of last year.
UniCredit Chief Executive Officer Andrea Orcel has pledged to consider mergers and acquisitions provided they add shareholder value.
“Given UniCredit’s existing presence in Russia, Otkritie could fit that bill but it would likely be questioned by investors given scale of the business and current geopolitical climate,” the analysts wrote.
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.
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