Barclays made wrong bet in Russia: press

16th February 2011, Comments 0 comments

British bank Barclays, which is closing its retail business in Russia, may have made one of the worst foreign investments in the country's post-Soviet history, reports said Wednesday.

Barclays said Tuesday that it would sell Barclays Bank Russia by the end of the year and focus on Russian investment banking through Barclays Capital.

The British giant launched its retail activities in Russia in 2008 by acquiring Expobank for £373 million ($745 million) in a deal that was hailed at the time as one of the most important in the country's nascent banking sector.

But Barclays Russia was never able to recover from the 2008 global financial crisis after trying to focus on the premium banking sector and servicing clients such as restaurants and major stores, whose business was plummeting.

The bank announced a £244 million ($392 million) write-down in its 2010 annual report in connection with its Russia operations.

"The purchase by Britain's Barclays of a Russian bank for $745 may turn out being one of the worst foreign investments in Russia," the Vedomosti business daily wrote.

"Barclays has already written down nearly $400 million but after selling its Russian subsidiary, its losses may grow," Vedomosti said.

The daily compared the investment to the US financier George Soros' 1997 purchase of a stake in the Russian communications company Svyazinvest, a deal in which he eventually lost more than $1.2 billion.

Moscow business dailies noted that other foreign banks were also winding down their Russian operations.

"Barclays is not the first foreign first bank to come away disappointed from Russian business development," the Kommersant business daily said.

The newspaper noted that Belgium's KBC Bank and Sweden's Swedbank were also selling stakes in their Russian subsidiaries, with a similar decision reached last year by Spain's top lender Santander.

Barclays said Tuesday that it was opening negotiations with potential purchasers. Vedomosti, citing one Barclays source, said the bank does not expect to get more than five billion rubles ($170 million) for its retail business.

© 2011 AFP

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