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29 октября 2014

Investment Attractiveness Rating of Russian Banks

Probably, many bankers, analysts and observers with nostalgia bring back to memory the period from 2000 till September 2008, when the news about conclusion of transactions on acquisition of Russian bank assets almost followed one another, and premiums to the capital of the acquired banks staggered even the most pampered imagination. At those times selection of investors was mainly predictable: preference was given to financial and credit organizations with a multibranch network, a large customer base and a more or less diversified product line, especially in the part of retail business.

The crisis of 2008–2009 forced potential investors to revise their value systems. Not but that the above selection criteria completely lost their attractiveness in the eyes of buyers, but other criteria started to be considered (and often overweight) alongside with them. Nowadays, as experts note, special attention is paid to such indices as quality of bank assets (on which the interest rate directly depends), structure of capital, availability and large size of "liquidity cushion", access to refinancing in the line of the CB and the Ministry of Finance, chances to obtain public support in case the credit organization has any problems, etc. It is no more a secret to anybody that in due time insufficient accounting of one or several of these factors was of a bad service to buyers.

 Taking this into consideration, NBJ decided to make the task easier for those who do not rule buying a stake in a Russian player or an entire bank, and compile an investment attractiveness ranking of Russian banks. In compiling this ranking, NBJ and Eastland Capital attempted to collect key indicators.

Our partner in this project, Eastland Capital, is a Russian financial company offering services in the Russian and European capital markets. Its core objective is to help Russian organizations and banks finance their development and also help investors identify the best investment options. Eastland Capital arranges financing (both equity and debt), refinancing and debt restructuring for its customers. In addition, the company offers services related to M&A, IPO/SPO, and sale of distressed assets. Eastland Capital’s areas of expertise also include purchase and sale of businesses and legal support of transactions.

 We hope that our ranking will show the right path to follow and guide a potential buyer to choose an asset that is both profitable and safe.

CALCULATION METHODOLOGY

Information sources for making of the investment attractiveness rating of Russian banks were the data of the RF Central Bank and corporate sites of financial and credit organizations.

1. The rating included Russian banks, which had a license for banking activity as of the date of the rating.

2. At making of the rating we considered the following banks’ activity indices: assets, capital, profit, liabilities, obligations, form of incorporation, status of financial and credit organization, public share in the registered capital.

3. In case there was no public information allowing to determine this or that index, the authors’ expert opinion was taken into consideration.

4.Based on these indices ten coefficients were calculated for each bank: assets, capital, profit, "profit-capital" ratio, "own – borrowed funds" ratio, profit growth rate over the past year, capital growth rate over the past year, liquidity, regional status, public influence level.

5.The indices were standardized (reduced to one unit of measurement) and weighed for calculation of the coefficients. Ranging was performed for each participant based on the weighted and standardized indices.

Calculations, diagrams, tables, conclusions and descriptions used in this rating are a copyright item owned by the authors of the rating – National Banking Journal MC LLC and Eastland Capital. Any republication or any other use of this research requires preliminary consent of the rating authors.

Vasily VYSOKOV, Doctor of Economics, Professor Chairman of the Board of Directors Center-Invest Bank

Work with international financial institutions has enabled Center-Invest Bank to shift to a sustainable banking model that incorporates not only environmental and social responsibility, but also operating efficiency (organic growth, risk management according to national and international standards, profitability of business). Unlike speculative banking, sustainable banking is focused not on immediate profits, but on long-term profitability. Such model requires stricter self-regulation covering corporate behavior, business planning, risk and liquidity management, internal control, personnel, IT and reporting management. However, using international best practices in each field of regulation, Commercial Bank Center-Invest has managed to achieve the trajectory of sustainable development.

Center-Invest Bank holds leading positions in small business lending, energy efficiency, modernization of agriculture, and consumer lending in the south of Russia. A sustainable bank is not involved in the widening of the "higher risk/higher interest rate" spiral. On the contrary, low risks make it possible to reduce both lending interest rates and provisions for non-performing loans.

EVROFINANCE MOSNARBANK – SUCCESSOR TO THE BANKING TRADITIONS LAID DOWN IN THE EARLY PART OF THE 20TH CENTURY

In 1911, the largest private bank, Moscow Narodny Bank, was founded in Russia. In 1919, its London branch was reorganized into an independent financial institution called Moscow Narodny Bank Limited. In 1921, Banque Commerciale pour l’Europe du Nord (BCEN Eurobank) was established in Paris. In the mid 1920s, the two banks were acquired by the USSR Vnesheconombank and served the financial interests of the country and also provided business support to Soviet enterprises. In 2003, their subsidiary banks, JSCB Evrofinance and CB Mosnarbank, merged to form JSCB EVROFINANCE MOSNARBANK OJSC, on the basis of which a Russian-Venezuelan bank was created in partnership with the Venezuelan National Development Fund.

Today, EVROFINANCE MOSNARBANK is a universal credit institution holding all required licenses to carry out any banking operations. The bank’s objective is to promote comprehensive development of bilateral trade and economic cooperation between Russia and Venezuela, increase investments and stimulate joint projects in both countries. The bank has historically focused on providing services in export and import trade, financing technical modernization and arranging medium and long-term financing for its customers, which include major enterprises of the military-industrial complex, oil and gas, machine building, energy, and other industrial sectors in Russia.

FRESCO BANK: FOCUS ON EFFICIENCY

The credit institution was incorporated in March 1991 as a unit bank called Fermer, founded by farmers from the Yaroslavl Region. In December 1992, the financial institution was transformed into OJSC Yaroslavsky Krestiyansky Zemelny Bank. In April 1997, its name was changed to CJSC ACB Yaroslavsky Zemelny Bank.

Following re-branding in February 2013, the bank got its current name Fresco Bank (JSC) and was re-registered in Moscow. In addition, its owners also changed in 2013. Since the beginning of 2014, the bank’s net assets have increased to RUR 1.4 billion (by 55.8%). As a result of an additional share issue, its capital almost tripled to reach RUR 511.8 million. Balances in accounts of legal entities have almost doubled. On the asset side of the balance sheet, the bank has substantially expanded its loan and securities portfolios.

The Board of Directors of Fresco Bank has approved a development strategy to 2016, which sets out priority areas for the bank’s work: increasing business returns and profitability and improving performance.

The bank’s mission is to provide a tailored approach to each customer, offering more reliability and stability, and to develop the programs  launched in 2013.

Investment Attractiveness Rating of Russian Banks

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