Denis Gorbunenko has turned a banking minnow into a rising giant – and he’s not finished yet. Ben Aris reports.

Sitting in the café under the Premier Palace, Kiev’s finest hotel, Rodovid Bank CEO Denis Gorbunenko is short of time.

It is the anniversary of the October Revolution (it actually happens in November). The streets of the Ukraine capital are snarled with traffic, as several thousand communists march down the main thoroughfare, the Kreschatik. As a result, Mr Gorbunenko had to walk to the hotel where he is due to showcase his bank at an investment conference. He is looking for a strategic investor.

Rodovid is the fastest growing bank in Ukraine, which has leapfrogged up the rankings since Mr Gorbunenko took it over three years ago. And it is not just Mr Gorbunenko who is rushing on this day: all of Ukraine’s bankers are, understandably, slightly breathless. Deposits are expected to rise by more than a third and total banking sector assets by just under half in 2007. But Rodovid’s performance is exceptional.

Dramatic events

In 2004, Mr Gorbunenko was vice-president of leading commercial bank Krediprombank but as the economy began to soar – GDP was up 12% that year – he struck out on his own.

Ukraine has been something of a backwater for most of the past decade, then the world’s attention swung to watch the dramatic events in Kiev’s Mai’dan Square where Ukraine president Viktor Yushchenko’s supporters pitched their tent camp and faced down the incumbent administration of Leonid Kuchma.

But as far as commerce is concerned, the Orange Revolution barely registered. “In 2004, competition in the banking sector was just starting,” says one analyst. “By 2005 and 2006 the whole sector was growing very fast, with the assets of the banking sector rising by 60% a year.”

As it can take up to 18 months to get a banking licence Mr Gorbunenko, together with some private investors, bought Percombank, ranked near the bottom of the league. “It was also very small,” says Mr Gorbunenko.

He won’t say how much he and his partners paid for it other than it was “a very small amount” but the bank instantly began to grow. When Mr Gorbunenko took over in 2003 the bank had one office and a mere $27m in assets. Four years later it has 115 branches and assets of $1.5bn as of November 1 – and is ranked as the 18th largest bank in the country by assets.

The bank was rebranded Rodovid – an old Ukrainian word – and in the first nine months of this year its assets doubled. In fact it was the biggest increase in the sector – and the bank boosted its customer lending portfolio by 139% to just over $1bn, the biggest rise of any bank in Ukraine.

Mr Gorbunenko has built up Rodovid by playing to his own strengths. At Krediprombank it was to corporate clients that he turned first for customers. The bank picked up the account of Motor Sich, a leading aero engine manufacturer, as well as several other large industrial enterprises. And doing the payroll for these companies provided a platform on which to build a retail operation.

“Retail banking is driving the growth of the Ukrainian banking sector but it is the corporate business that provides the revenues,” says Mr Gorbunenko. “Retail is competitive and profitable but it needs a lot of people and incurs a lot of costs, whereas corporate is much easier to organise, with a handful of managers.”

Significant share

Rodovid has captured a significant share of Ukraine’s retail loan portfolio, which makes up just over a third of the bank’s own loan portfolio, $380m as of the end of October. Retail lending doubled in the first nine months of this year but corporate lending is still growing faster – up by 163% in the same period. It accounts for two thirds of the bank’s loans book, $661m as of early October.

The game is changing now as competition in the banking sector has become fierce. The key to more growth is securing funding and boosting the bank’s capital. Earlier this year, Rodovid tapped the domestic bond market for UAH250m ($50m) and will be back for more soon. It also organised its first syndicated loan of $20m from international lenders before the turmoil in the international credit markets.

But the most significant event was Rodovid’s successful private placement of 18.9% of its shares at $600 each in April 2006 to raise $47m. Its share price has since hit $1800 and is still rising.

One analyst says: “Trading at average discounts of 24% to its domestic peers and 27% to CEE peers based on 2007E price to basic value, Rodovid is currently one of the cheapest and most promising banking stocks on the Ukrainian market.”

Mr Gorbunenko called off plans to place another 20% this year in September, citing poor market conditions. But investors won’t have to wait forever.

“Ukraine banks face a very simple set of choices in this market,” he says. “Merge, sell – or die.”

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