Page 65 - RusRPTApr19

banking sector. Russia’s banking sector earned RUB264bn ($4bn) in January, according to Central Bank of Russia data. The January result was also well over double the profits earned in all the months of last year and four times more than the RUB65bn that banks earned in December of last year. Analysts surveyed by Vedomosti daily believe that despite strong results, the shares of the bank are undervalued, linking it to low liquidity in the name. In the fourth quarter St Petersburg bank did not increase its deposit rate, unlike most of the other large players, and still managed to improve its margins, analysts noted. BCS Global Markets on March 20 expected strong results for the fourth quarter, supported by stronger NIM (net interest income), fees, cost of risk, CoR and trading results. The dividend payout and any buy-back initiatives are in investor focus, BCS believes. In August 2018 the bank already confirmed RUB660mn ($10mn) share buyback, confirming previous reports that the bank will try to boost its share price. "This [buyback] is the best signal we can make to the market, that we believe that shares are undervalued and we don't agree with the valuation," the chairman of the bank's board Konstantin Balandin said. Top managers of the bank control 50.48% of ordinary shares, out of, which 24.95% belong to the bank's chair Alexander Savelyev. Vedomosti claimed that among the shareholders is the son of former Russian Minister of Defence Sergey Serdyukov (8.53%) and the husband of the head of the Federation Council Valentina Matvienko Vladimir (2.33%).
Rosbank and DeltaCredit, Russian subsidiaries of French banking group Societe Generale, have decided to merge, the banks said in a statement on March 20. In September 2018, Societe Generale said a merger of the subsidiaries could be done by the middle of 2019.
Moody's Investors Service has downgraded Orient Express Bank's (OEB’s or Vostochny Bank’s) local and foreign currency long-term bank deposit ratings to Caa1 from B3, the agency said on March 15. The outlook on the bank's long-term deposit ratings changed to Negative from Rating under review. The "one-notch downgrade of the long-term ratings and assessments reflects corporate governance weaknesses at OEB reflected by a material understatement of problem assets on its balance sheet, as well as an ongoing conflict between its largest shareholders which could disrupt a planned RUB5bn share issuance," Moody's commented. OEB is central to the charges pressed against Michael Calvey, the US-citizen founder of Baring Vostok, Russia’s biggest and most successful private equity fund. Prosecutors have accused defendants of embezzling RUB2.5bn ($37.5mn) by persuading OEB shareholders to approve a share sale at an unrealistically low price. While details of the case were still emerging, RBC reported that the arrests were linked to a commercial dispute between the shareholders of OEB, which includes Barings and Russian banking wunderkind Igor Kim. In turn, Kommersant newspaper, citing sources, reported on a struggle for a controlling stake of the bank among the major shareholders, naming Baring Vostok and Finvision Holdings Ltd., which is owned by Artem Avetisyan. Kommersant’s sources claimed that the appointment of Harutyunyan, was a move by Avetisyan to take control. Moody's "understands that a conflict between the
two main shareholders of OEB, Evison Holdings Limited (with 51.6% of shares on behalf of Baring Vostok private equity funds) and Mr. Avetisyan (who holds 32% of shares via Finvision Holdings Limited) is still ongoing." The agency reminded that this has resulted in management team reshuffles. Since 2018 three CEOs or acting CEOs have been appointed. Moody’s warned that "such management shake-ups increase the uncertainty about the bank's strategy and risk profile." In addition, the recent detention of several partners and senior managers of Baring Vostok Capital Partners "significantly reduces the
65 RUSSIA Country Report April 2019 www.intellinews.com