REUTERS
By Douglas Busvine
August 12, 2005
SocGen to buy top Russia mortgage bank for $100 mln.
MOSCOW, Aug 12 (Reuters) - France's Societe Generale will pay around $100 million to buy DeltaCredit, the leader of Russia's fledgling home loans market, the seller said on Friday.
Societe Generale is paying around 2.5 times book value for outright control of DeltaCredit, said Patricia Cloherty, chairman and CEO of venture fund Delta Private Equity Partners.
"The price is in the range of $100 million, subject to adjustments and closing," Cloherty told a news conference, adding she expected final regulatory approval in November.
Societe Generale's purchase adds to its Russian portfolio, which includes consumer credit house Rusfinance, car loans specialist Promek Bank and Banque Societe Generale Vostok.
"All that was missing was a product specialising in home lending," said Pierre Bourset, Societe Generale's commercial manager for international retail banking.
The World Bank's investment arm, the International Finance Corp., recently bought a $6 million stake in DeltaCredit.
EXPLOSIVE GROWTH
With a lending portfolio of around $200 million, DeltaCredit controls a fifth of Russia's $1 billion home loans market, which is worth just 0.2 percent of gross domestic product.
The bank estimates the mortgage market will explode to $20 billion to $30 billion by 2010, now that legislation is in place and increasingly affluent Russians set their sights on buying their own homes.
"Our goal is to grow with the market," said Igor Kouzine, chairman of the board of DeltaCredit.
With the acquisition, DeltaCredit's credit ratings should improve, enabling it to raise cheaper funding on capital markets than its Russian-owned competitors.
Ratings agency Standard & Poor's responded to the deal by putting DeltaCredit's 'B' long-term rating on review for a possible upgrade. S&P rates SocGen 'AA-' with a stable outlook. DeltaCredit plans to issue around $100 million in mortgage-backed bonds in 2006 and will look at both international and Russian capital markets as potential funding sources, executives said.
The DeltaCredit sale comes almost a year after Delta Private Equity Partners sold consumer loans specialist Delta Bank to GE Consumer Finance , which paid $100 million and provided a $50 million credit line.
The GE unit wants to move into the mortgages sector, but Societe Generale has no plans to rebrand its latest acquisition to avoid confusion in the minds of potential customers.
"The DeltaCredit brand is very well known and has a high reputation on the Russian market," said Boursot, adding it would be a "terrible mistake" to abandon it.
DeltaCredit was owned by two funds under Delta's management, the IFC and the General Electric pension fund, said Cloherty, adding that some of the owners would realise triple-digit annual percentage returns on their investment.
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THE FINANCIAL TIMES
August 13, 2005
SocGen buys DeltaCredit in Russian deal.
Societe Generale, the French bank, yesterday added to its fast-expanding Russian activities by buying DeltaCredit Bank, a specialist mortgage lender, in a deal worth about Dollars 105m.
The acquisition from Delta Private Equity Partners, a US management company, and International Finance Corporation, a private sector finance unit of the World Bank, gives SocGen a foothold in the relatively young Russian mortgage market.
The French bank said DeltaCredit, founded in 2001, was "the leading domestic mortgage lender in the Russian federation" with Dollars 200m of mortgages, equivalent to a 20 per cent market share, and 128 staff. Rumours about a possible deal with SocGen started in July.
DeltaCredit would add to SocGen's existing presence in Russia, including Rusfinance, the consumer credit business launched in early 2004, Banque Societe Generale Vostok, its universal banking arm, and Promek, the car loan provider it acquired earlier this year.
The deal was expected to close by early October after obtaining regulatory approval. If SocGen's acquisition of the Moscow-based mortgage lender is successful, it will confirm the French bank's focus on east Europe as its main target area for expansion. In April it bought Eurobank, a Polish financial services companies.
It would also contrast with the fortunes of other French companies in Russia, such as rival bank BNP Paribas, which has had acquisitions of Russian companies unravel in the last year.
Pierre Boursot, SocGen's commercial director, said it would keep DeltaCredit's management and its brand. "The DeltaCredit brand is very famous on the Russian market and if we remove this name it would be a big mistake," he said.
Standard & Poor's put its 'B' long-term and 'C' short-term counterparty credit and 'ruA-' Russia national scale credit rating for DeltaCredit on credit watch with positive implications. "This transaction fits well with SocGen's international retail banking strategy and will enlarge its presence in Russia," said S&P.
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