• Review of the market of banks on sale.
• Average transaction prices in 2002
• What influences the price of a bank?
• Rating of a bank by location.
• Calculate the price of a bank.
• Does a buyer of a bank need an intermediary?
• Does a seller of a bank need an intermediary?

1	Location	Moscow	Region (regions 2-6)
2	Main licenses	Foreign-exchange license (incl. general)	Roubles
3	Time in business (influences the availability of the license for transactions with private individuals)	Old (more than 2 years)	New (the license was received less than 2 years ago)

	Location	Licenses	Time in business	Price, $
1	Moscow	foreign exchange	old	650
2	Moscow	foreign exchange	new, authorised capital =Euro 1 mln	680
3	Moscow	foreign exchange	new, authorised capital =Euro 5 mln	780
4	Moscow	general	old	1300
5	Moscow	roubles	old	400
6	Регион 2-4	foreign exchange	old	420
7	Регион 2-4	roubles	old	250

The price of a bank license to be sold is not always related to its market value. WG receives quite a few offers of the following kind: a bank for sale is located in a region, holds a license for transactions in roubles, its authorised capital equals half a million roubles - and its sale price is 5 million US Dollars. It may take much time and negotiation to convince the bank seller that the market will not jump at this offer, but it is the offer that shall push its way onto the market. WG will include a bank in its database on condition that its price is not highert than 130% of the fair price; we recommend to the seller to level down the price and inform him about what the fair price is. In the long run the seller follows this recommendation, because WG gives also an indication of a period of time, within which the transaction may be concluded if the price is fair.


1. Location


Rating by location:

1. Moscow
2. Moscow region
3. Central Russia
4. Siberia
5. Far East
6. Russian republics (except for 7-8)
7. Tatarstan, Bashkortostan
8. Caucasian republics

2. Licenses. A bank holding a license for foreign-exhange transactions is about 1.5 times more expensive than a bank with a rouble license. A bank holding a general license is about 1.5 - 1.8 times more expensive than a bank with a foreign-exchange license.


3. Clientele of a bank is a relative indicator, because the seller does not guarantee that its clients will not close their accounts with this bank, although he is usually willing to undertake to bring the buyer in touch with key clients and 'give them over' to the buyer himself. For this reason sale of a bank as a business is possible only in those cases when the assurance coefficient of a bank is very high, and its corporate clients number tens of thosands. In other situations the sale of a bank is considered to be a sale of its license and - sometimes - also its infrastructure for building up the buyer's business.


4. Available bank premises, personnel, software, office equipment, furniture, cash collection vehicles, etc. do not have a tangible influence on the price of a bank: its aseets are evaluated at their depreciated cost and do not add to the value of the bank, although they can change the demand- with other things being equal the buyer can choose a bank with assets. Premises, same as other assets, are viewed as an option - at the buyer's option assets are either withdrawn or reimbursed. The bank's personnel will also be evaluated by the buyer already during the audit of the bank. As a rule, no more than 20% of the former bank personnel stay after a year when the bank is sold. It may happen that available personnel is viewed as a disadvantage by the buyer, because this puts him under an obligation; he has his own personnel (for example, a buyer who is a banker).

The procedure of selling a bank is made more complicated by the buyers' and especially sellers' intention not to disclose information on sale and purchase of a bank.


The seeler is worried that buyers will be interested why the bank was not purchased by a previous buyer. And even if the buyer was simply short of money or changed his intentions, this refusal may affect the reputation and price of the bank.


Other reasons - likely loss of clientele, who received information on the bank's sale to an unknown buyer; worries of minority shareholders, creditors, etc.


And finally the disclosure of information on sale can make the personnel start looking for new jobs, which is only natural, and this will be to the detriment of their resposibilities. According to Chairman of the Board of one of the banks on sale, "I will fail to submit my accounts if they (the pesonnel) learn that the the bank is to be sold!"


Does a buyer of a bank need an intermediary?


No, he does not, if the buyer has:

• a selection of offers, meeting hid requirements
• current price monitoring of the banks offered for sale
• experience in selling and buying banks of different categories and legal forms
• experience in due diligence of property rights of bank sellers
• experience in executing and following through the documents for the Russian Central bank and the Federal Antimonopoly Service

Does a seller of a bank need an intermediary?


No, if the seller:

• is aware of the conditions and prices in the last 10 bank sales
• is aware of available similar offers on the market at present
• considers that information on the sale of a bank does not inflict any damage
• is ready to negotiate the sale of his bank with all those who wish
• knows the details of the procedure of selling a bank, methods of providing safety and is prepared to make them known to the buyer.

In what ways can WG assist the seller of a bank?


1) analyse the market situation of today and make an offer to be marketable
2) include an offer in WG database of the banks on sale (information, provided to a buyer, does not make it possible to identify a bank)
3) find the 'right' buyer within a short time
4) succeed in resolving a problem which is a very 'hard nut to crack' - get only those buyers who have prooved they are willing and can afford to buy a bank
5) make sure that the parties follow the procedures according to which the seller is entitiled to reimbursement if the buyer abandons the intent to buy a bank after its audit
6) guarantee execution of documents required for the transaction, and their registration.


In what ways can WG assist the buyer of a bank?


1) offer a choice of about 50 banks offered for sale
2) elaborate and arrange the complete procedure of buying a bank
3) warn against typical mistakes and fallacies
4) guarantee execution of documents required for the transaction, and their registration, approval by the Russian Central Bank of the candidacies of Chaipman of the Board and Chief Accountant, and approval by the Federal Antimonopoly Service
5) to make sure the contracting parties follow the procedure, which guarantees that if the seller refuses to conclude the transaction after the bank has been audited, the buyer shall receive compensating payment
6) eliminate errors made earlier (when the bank was sold/bought or its authorised capital was increased) due to which the seller's proprietary right was infringed.



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