Russian investment conglomerate AFK Sistema is in advanced talks to acquire consumer lender Home Credit Bank in Russia, RBC business portal reported, citing unnamed sources.

Home Credit Bank is one of the last major Russian assets of Czech investment group PPF, and the deal would be one of the largest recent acquisitions on the Russian banking market. PPF told bne IntelliNews that it would not comment on market rumours, while AFK Sistema refused to comment to RBC.

The bank is being sold after the death last year of the Czech billionaire Petr Kellner, and the takeover of PPF by his widow Renata Kellnerova. New CEO Ladislav Bartonicek has maintained the business strategy of Kellner of shifting PPF's focus back to developed markets such as the Czech Republic, where the group is in the process of taking over Moneta Money Bank.

Reportedly, the political turmoil in Kazakhstan influences the talks, as Home Credit earns a significant share of its profits in the country. Home Credit had RUB91bn ($1.2bn) capital as of September 2021 and earned RUB11bn net income in 9M21, a third of which was in Kazakhstan.

The deal could thus top $1bn if the valuation is based on the capital of the bank, making it the largest deal since the acquisition of Vostochny Bank by Sovcombank that ended the most controversial Russian corporate scandal with Baring Vostok Capital Partners.

Kellner's PPF has been active in Russia since the 2000s, holding such major assets as Eldorado electronics retail chain (main shareholder), Ingostrakh insurance company and a stake in Polymetal gold and silver miner (minority shareholder), but has been selling off since the 2010s. With the sale of Home Credit Bank, PPF's main investments in Russia would comprise mainly real estate, farming, insurance and a small remaining stake in Polymetal.

Previous reports by Frank Media claimed that Hungarian OTP Group was also among the contenders for Home Credit Bank, along with AFK Sistema.

For Sistema, "the deal would be within… [the] strategy, yet the structure and financing would be key," BCS Global Markets commented on January 11, seeing the deal as neutral for now and reiterating a 'Buy' call on Sistema's shares.

As reported by bne IntelliNews, Sistema's anchor asset Mobile TeleSystems (MTS) mobile operator has been building up strong banking and fintech verticals after the incorporation of MTS Bank. The Home Credit Bank’s capital is at 0.4x MTS’ 2021 Ebitda, BCS GM estimates. 

This would make the deal significant, so investors may not appreciate it if the carrier buys the bank on its own account, BCS GM warns.

However, the deal structure is yet unclear, including whether it will involve MTS, which owns MTS Bank, or whether it has any relations with the key shareholder of Sistema, Vladimir Evtushenkov, or the earlier flagged possibility of an IPO of MTS Bank. 

AFK Sistema has seen a number of powerful catalysts, such as the sale of its stake in Detsky Mir children's goods retailer, the IPO of major e-commerce player Ozon and an IPO of Segezha timber major, and has been planning for more IPOs.