Russia's Alfa to merge banking units

Financial News

Jason Corcoran in Moscow

10 August 2009

Russia’s Alfa Bank, is merging its investment banking and corporate banking businesses into one division in a move it believes is a "revenue opportunity".

The new unit will be aimed at increasing Alfa’s ability to sell products ranging from loans to advice on takeovers to its 40,000 plus corporate clients. The move mirrors a decision taken by Citigroup in the aftermath of last year’s financial crisis.

Ed Kaufman, co-head of corporate and investment banking at Alfa Bank, said: “It’s not a cost issue but a revenue opportunity. The client managers on the corporate banking side will be put together with the corporate finance team to offer the best products to our clients.”

Kaufman dismissed rumours among Russian bankers that the group was closing its investment bank and said it had just posted its best two quarters. “There were a lot of trading opportunities in fixed income where we invested heavily and booked the profits. We have also done well in equities and made more money from making educated bets.”

Kaufman and Vladimir Tatarchuk, head of corporate banking, will co-lead the combined division.

Alfa, which is controlled by the billionaire Mikhail Fridman, employs 135 in its investment bank and 600 in its corporate bank. The group has already downsized in many areas of corporate and investment banking over the last year. “We would look to see how markets develop if there needs to be reductions or additions in any specific areas but there are no layoffs due to the merger,” Kaufman said.

The bank insisted there would be no conflict of interest resulting from combining the two businesses.
Kaufman added: “We do not believe that corporate bank relationship managers will be able to sell M&A or corporate finance products but they are a key part of the coverage model and will be trained to understand the products and also to know when they need to bring in product specialist.”

The president of Alfa Bank, Pyotr Aven, has been one of the most bearish commentators on the prospects for bad loans in Russia’s banking sector. Aven has warned that the country's banks' non-performing loans could rise to 30% of assets, from an estimated 10% today.

Alfa hit headlines in March this year when it clashed with the oligarch Oleg Deripaska in a bid to protect itself against the possible default of a $1bn (€780m) loan. It comes as Deripaska faces a struggle to restructure his outstanding debt to other creditors.

Bloomberg reported on July 31 that Deripaska’s Basic Element unit is close to agreeing with Alfa on revising terms of $800m in debt.