Billionaire owners leave Otkritie fending for itself as Russia swoops in for rescue

As Russia’s second-biggest private bank implodes, its billionaire owners have been conspicuous by their absence. By leaving Bank Otkritie to fend for itself, the four shareholders controlling more than a third of the company — their combined fortune valued at over $20 billion — may be giving the authorities little choice but to swoop in with a rescue. Now the central bank could be left holding the bag as it considers taking control of the troubled lender amid a run on its deposits.

“Minority owners are less incentivised to provide support,” said Alexander Danilov, a Fitch Ratings analyst. “The magnitude of outflows is too big for them to cover, plus I imagine their wealth is mostly stakes in companies and not cash.”

While private banks have been on the defensive since the regulator began a purge in which over 300 firms have lost their licences, some tycoons have stepped up to keep their institutions afloat. The chief executive of billionaire Mikhail Gutseriev’s Safmar Group said its B&N Bank may be recapitalised by 25 billion rubles ($254 million) this year. In 2004, the owners of AlfaBank provided $800 million as customers pulled funds, stemming the panic.

Otkritie Holding, which controls the bank, has a diverse ownership structure. Two Lukoil PJSC billionaires, Vagit Alekperov and Leonid Fedun, precious metals magnate Alexander Nesis and entrepreneur Alexander Mamut own a combined 36 per cent of the group.

Otkritie may be transferred to a central bank-controlled fund created to bail out failing lenders, although a final decision hasn’t been made, Vedomosti reported, citing several unidentified people in the industry. Its debt tumbled into distressed territory after the publication on Friday, with subordinated bonds due in April 2019 slumping 41.72 cents on the dollar to 50.24 cents.

More often than not, no aid is forthcoming for private lenders from their owners. The central bank pulled Jugra Bank PJSC’s license when it found majority shareholder Alexey Khotin’s offer to help lacking, despite a challenge from the Prosecutor General’s Office. Tatfondbank PJSC shareholders held talks with the regulator for more than half a year before it pulled the plug.

Private lenders have already been closing in droves amid a cull by the central bank that’s yanked one in three licenses since 2014. Their state-controlled rivals, with access to cheap funding and a government backstop, have been the biggest winners from the cleanup as many owners balk at resuscitating their under-capitalised institutions.

What Otkritie’s billionaire owners have in common is that they became shareholders as they sought to reduce their exposure to the banking business. Alekperov and Fedun received their 20 percent, held by their US-sanctioned IFD Kapital, after Otkritie agreed to take over a bank founded by Lukoil in 2013.

Nesis and Mamut gained stakes — currently 9.8 per cent and 6.7 per cent, respectively — via a similar share swap for their Nomos Bank in 2012. Adding to the complexity is a 10 per cent holding in Otkritie’s parent company owned by state-controlled VTB Group, which also worked on many deals with the bank in the past, including financing its acquisition of Nomos.

BLOOMBERG

Private lenders have been closing in droves amid a cull by the central bank, yanking one in three licences since 2014