Why Russia’s Biggest Private Bank Rattles Nerves

MOSCOW, RUSSIA - JUNE 22: Logo of the Otkritie Bank on June 22, 2012, in Moscow, Russia. Photo by Ute Grabowsky/Photothek via Getty Images)***Local Caption***

Bank Otkritie FC, Russia’s largest private bank, has had a bumpy ride of late. In June it lost $1.7 billion in deposits. Then, following the collapse of a smaller competitor, a wave of rumors on social media questioning the bank’s stability grew so intense that Vadim Belyaev, its largest shareholder, was forced to address them. With the bank currently in talks with a potential investor over a significant capital injection, Belyaev has returned to the helm to calm the market’s nerves.

1. Is Otkritie at risk of collapsing?

Probably not. The Bank of Russia considers Otkritie a systemically important lender, and First Deputy Governor Dmitry Tulin recently gave it an oblique vote of confidence. On Aug. 2, Tulin said he doesn’t expect any such lenders will lose their license in the foreseeable future.

2. Why are investors and depositors worried?

Even before a poor score from Russia’s ACRA rating agency in July sent Otkritie’s Eurobond yields soaring, customers were pulling deposits. Outflows reached 104 billion rubles in June as the Bank of Russia’s ongoing cleanup of the financial sector made Otkritie’s clients nervous. The regulator has yanked one in three banking licenses since 2014, including the country’s 15th-largest holder of individual savings in late July. And if that wasn’t bad enough, a large part of Otkritie’s ATM network crashed this month after road work in Moscow knocked out two vital cables.

3. Who might come to the bank’s aid?

The potential new investor hasn’t been identified. State-owned VTB Group, which owns 10 percent of Otkritie’s parent company, said it has no plans to take an additional stake.

4. Who owns the bank?

A motley crew of Russian magnates. Otkritie  — which means “open” in Russian — has a shareholder structure that’s unusually diverse for Russia, where minority owners’ interests are usually viewed as expendable. Belyaev owns 29 percent of Otkritie Holding, which in turn has a controlling stake in the bank. Other large shareholders include Lukoil PJSC billionaires Vagit Alekperov and Leonid Fedun, Alexander Nesis’ ICT Holding, Ruben Aganbegyan and Alexander Mamut. And VTB, which is among the companies targeted by U.S. and European Union sanctions against Russia, received its stake in Otkritie after a loan went south in the 2008 financial crisis.

5. Does VTB’s stake mean Otkritie is state-run too?

In Russia, even private business isn’t immune to pressure from the state. However, management at both banks deny that there’s anything beyond the 10 percent stake VTB owns in Otkritie Holding. VTB financed the 2012 deal that made Otkritie a major player. It sold part of RCB Bank Ltd. in 2014 to Otkritie, reducing its share in the Cyprus bank to less than 50 percent after western sanctions were imposed. VTB also was the brains behind a secret 1 trillion-ruble reverse repo deal with Rosneft in 2014 that netted Otkritie a fortune.

6. How long has Otkritie been Russia’s biggest private bank?

It burst on the banking scene with its 2012 acquisition of Nomos Bank, one of Russia’s largest private lenders. It expanded throughout the recent banking crisis while most competitors were retrenching, receiving 127 billion rubles in central bank funding to bail out a top-20 deposit holder, National Bank Trust. But the coup de grace was in 2014 when it bought over 800 billion rubles of Russia’s 2030 Eurobond — 74 percent of the issue — making it the largest private bank overnight. It continues to grow aggressively, with a planned takeover this year of Russia’s largest insurer, in a move that S&P Global Ratings warns will erode its capital adequacy.

7. Who is Belyaev?

Belyaev, 51, cut his teeth in business as a teen selling imported watches back when it could have landed him in a Soviet prison. He has been in banking for two decades, with his big break coming when he started Otkritie with billionaire Boris Mints. Belyaev keeps out of the limelight compared to other heads of large banks, and defined himself as a “risk taker” rather than an investment banker in a 2015 interview when he was awarded GQ Russia’s Businessman of the Year. While he stepped back from day-to-day management in 2014, as of this month he is back in the driver’s seat at Otkritie.

The Reference Shelf

  • A QuickTake Q&A on who loses the most in the sanctions fight between Russia and the U.S.
  • Russia’s central bank is pulling the plug on future bailouts after spending $19 billion to contain the country’s financial crisis.
  • Eurobonds issued by leading Russian private banks are the worst performers among their emerging-market peers this quarter.
  • How Rosneft crashed the ruble, with Otkritie’s help.

— With assistance by Anna Baraulina

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