Promsvyazbank might buy SMP Bank - paper

MOSCOW. June 23 (Interfax) - Promsvyazbank (PSB) is considering buying Northern Sea Route Bank (SMP Bank), national daily Kommersant said on Thursday, citing sources familiar with the situation.

The parties have been discussing a deal since last December and PSB did due diligence of SMP Bank at the beginning of 2022, which took about two months, the sources said.

Neither analysts nor market players ventured to estimate the price of the deal, including because of the complete closure of information on the banking sector, foremost banks subject to sanctions, the paper said. Both PSB and SMP Bank are now subject to blocking U.S. sanctions that provide for the freezing of assets in the United States and prohibit U.S. citizens from conducting any transactions with the banks.

SMP Bank has been managing the financial turnaround of Mosoblbank since May 2014. Kommersant reported one of its sources as saying that the acquisition of SMP Bank could essentially give PSB "its own pocket bank for bad debts" in Mosoblbank. When undergoing the process of financial recovery, banks are not required to comply with the Central Bank's statutory ratios, which entices banks handling the turnaround to transfer their own toxic assets to the recovering bank's books.

PSB is owned by the Russian state through the Federal Property Agency. It has been turned into a bank for serving major government contracts and defense contracts. PSB already has experience acquiring other banks, as it bought Sviaz Bank from VEB in December 2019 and 100% of bailed-out Roscosmostbank from state corporation Roscosmos in December 2020. Furthermore, Moscow Industrial Bank is expected to be merged into PSB by May 2023.