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DNB Sells Russian Operations as Regional Expansion Stalls

DNB ASA, Norway’s largest bank, agreed to sell its Russian operations as business failed to materialize amid delays to an Arctic gas project.

JSC Commercial Bank DNB Bank will be sold to Asokerco Trading Limited LLC, owned by the majority shareholder in B&N Bank JSC, Mikail Shishkhanov, Oslo-based DNB said today. While the terms of the transaction aren’t disclosed, the deal may have a “very small” negative effect on second quarter results, spokesman Thomas Midteide said by phone.

“With the postponement of Shtokman and the fact that the increased cross-border interaction didn’t take place, the strategic rationale for maintaining the operation gradually disappeared,” said Harald Serck-Hanssen, head of the large corporates and international unit at DNB, by phone from Bergen.

OAO Gazprom’s Shtokman project in the Russian Barents Sea has been stalled for years amid galloping costs and technical challenges. A venture agreement with Norway’s Statoil ASA and France’s Total SA lapsed in 2012, opening the door for talks with potential new partners.

Capital Levels

The sale of the Murmansk-based business is “in line with DNB’s strategy to focus its operations, optimize the use of capital and increase profitability,” DNB said. “Through this acquisition, B&N Bank will establish a footprint in Murmansk adding to its expanding outreach across the Russian Federation.”

DNB is raising its capital levels to comply with stricter requirements. The bank said in February that it had increased its Tier 1 capital by 12.4 billion kroner ($2 billion) during the last 12 months and expects “a further increase of more than 40 billion kroner will be required towards 2016.”

The transaction remains subject to the relevant regulatory approval, according to DNB. Societe Generale SA acted as financial adviser to DNB.

“The process started long before the uncertainty over Ukraine,” Serck-Hanssen said. “This is also part of the bank’s plan to build equity to meet core equity requirements set by the Norwegian FSA.”

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