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bne September 2017 Cover story I 29
If the CBR can clam nerves then in theory the banking sector profits that can be used to improve tier 1 ratios will continue to reduce pressure. The problem is while the very profitable retail lending has finally started to rise again after several years of contrac- tion, corporate lending is falling as Russia’s leading companies prefer to borrow longer and cheaper on inter- national markets. As bne reported in
its last monthly bond market wrap the volume of international bond issues by Russian companies roughly mirrors the fall in corporate loans at home.
The high cost of borrowing is the culprit and despite the string of rate cuts in the last year, the CBR’s base rate remains 9%. With slow growth of under 2% expected this year, the cost of borrowing is still too high to
make many investment projects in Russia viable. After inflation returned to falls in July the CBR is widely expected to resume its rate cuts at the next meeting in the middle of September, but it will be another year at least until the rates are low enough to spur domestic borrowing.
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directors of Otkritie the same year, when Belyaev was heading up the operation.
From 2005 to 2008, Otkritie invested in the development of Class A office buildings in Moscow, managed through the private equity arm of Otkritie Holding led by Mints’s son Dmitri.
For some reason that remains unclear both Mints and Chubais sold out in 2013 with Belyaev and banker/lawyer Ruben Aganbegyan buying their stakes. According to one version of the story, Mints defaulted on big loans he had taken from Otkritie, which provided the finance to start his real estate empire. But given Otkritie continued to rent its office space from O1 this is probably not true.
Alexander Nesis
Nesis is an old school oligarch who built up his wealth in the shipbuilding and chemical industries. He is one of the few Yeltsin-era oligarchs to have smoothly transitioned
to the Putin era with his business seemingly entirely unaffected by the change in power.
The empire began with the establishment of ICT (Investment, Construction, Technologies) company in 1993, which invested into shipbuilding and metallurgy, eventually taking over the iconic Baltic Shipbuilding Yard, where Nesis used to work as an engineer. He also has investments in
a dizzying array of firms and sectors including stakes in gold miner Polymetal and potash producer UralKali. He co-invested in Nafta-Moscow, Nomos bank and Polymetal with financier Alexander Mamut.
His connection to Otkritie is his bank Nomos bank that IPO’d in April 2011 raising $718mn in the process and valuing the bank at $3.2bn. This is still the largest commercial bank flotation in Russia to date.
At the time, portfolio investors were very excited by the Nomos IPO, which was a rare offering of a mid-sized bank and so was a perfect vehicle for investors interested in getting exposure to Russia’s growing financial sector and its middle classes without having to invest into a state- owned bank.
The same investors were more than a bit miffed when its owners took Nomos private again a little more than two years later and sold it to Otkritie. The deal was financed with a $1bn loan from VTB and the two banks were merged to become Financial Corporate Otkritie. Minority investors were bought out at $14 per share, below the $17.5 the bank floated at.
Alexander Mamut
Mamut is one of the most impressive businessmen in Russia. He can not be described as an oligarch as he didn't participate in the Yeltsin-era carve up of Russia’s industrial crown jewels and has not obviously fed at the trough of state spending that made most of his peers rich. He is better described as a financier, the Russian Warren Buffet, who simply keeps making great deals.
He got his start in 1990 by founding Imperial Bank that specialised in working with oil and gas companies, with clients that included Gazprom and LUKoil. He went on to found a successful supermarket chain Sedmoy Continent, was also an early investor in MDM Bank, one of Russia’s leading commercial banks, and bought Evroset mobile phone retailer in 2008 when its founder Evgeniy Chichvarkin fled into exile. He is a large investor into insurance company Ingostrakh and former investment bank Troika Dialog that was later sold to Sberbank. And so on. Mamut is serial deal-maker. His entry into Otkritie was via a stake he bought in Nomos bank in 2011 from Czech investor Peter Keller when Nomos was taken over by Otkritie.