Barclays Acquires Russia's Expobank for $745 Million

Barclays Plc, the U.K.'s third-biggest bank, acquired Russian lender Expobank for $745 million in its first overseas acquisition since losing the bidding contest for ABN Amro Holding NV.

Barclays agreed to pay cash for Petropavlovsk Finance Ltd.'s 100 percent stake in Expobank, the London-based bank said today in a statement. Expobank has 32 branches concentrated in Western Russia, including St. Petersburg and Moscow.

Barclays already operates in Russia through its investment banking unit, Barclays Capital. The bank, which has lending units in Spain, Portugal and South Africa, offered about 65 billion euros ($99 billion) last year for Amsterdam-based ABN Amro before losing to Royal Bank of Scotland Group Plc. Barclays is paying about four times Expobank's book value of $186 million.

``It looks like they are paying a big number, but you have to keep it in perspective of the size of the group,'' said James Hutson, a London-based analyst at Keefe, Bruyette & Woods Ltd. ``It has strategic rationale and shows the direction they are going,'' said Hutson, who rates Barclays ``market perform.''

Barclays fell 3 percent to 462.75 pence at 10:25 a.m. in London trading, valuing the bank at 30.2 billion pounds. The shares are down 35 percent from a year ago.

Barclays seeks to increase overseas profit amid a deteriorating U.K. economy and the collapse of the market for credit-related securities, previously a growth engine for Barclays. Expobank, with one of the largest networks of automatic teller machines in Moscow, had assets of 29.8 billion rubles ($1.24 billion) as of Jan. 1.

Consumer-Lending Boom

Russian banking, dominated by state-owned giant OAO Sberbank, is in a consumer-lending boom, fueled by the country's 10th straight year of economic growth. Russia grew 8.1 percent last year, compared with 2.9 percent in the U.K.

Barclay's purchase of Expobank is the latest in a string of acquisitions by European banks. Societe Generale, France's second- biggest bank by market value, boosted its stake in OAO Rosbank, Russia's eighth-biggest, to more than 50 percent last month from about 20 percent and said it will increase its holding to 58.7 percent.

UniCredit SpA, Italy's biggest bank, raised its stake in ZAO International Moscow Bank to 100 percent last June. Raiffeisen International Bank, Austria's biggest by market value, paid $550 million for Russian lender Impexbank in 2006, making it the country's largest foreign bank.

The acquisition of Expobank represents a ``great opportunity'' as Barclays seeks to be become ``one of the leading retail and commercial banks in Russia,'' Frits Seegers, head of consumer lending at Barclays, said in the statement.

Barclays expects to complete the transaction by this summer and generate profit on the acquisition by 2011, according to the statement.