Lying astride the Volga and Kama rivers some 800 kilometres east of Moscow, Tatarstan is not the first place one might expect to find one of Russia’s most dynamic banks. Yet this small constituent republic of the Russian Federation has big ambitions for its banking sector, and leading the charge is Ak Bars Bank (ABB).
“We aim to be one of the top 10 banks in Russia by 2010, orientated mainly towards retail banking and with an extensive network of branches across Russia,” says ABB chairman Robert Minnegaliev.
Headquartered in Kazan, Tatarstan’s booming capital, 93% of ABB is owned by Tatarstan’s government, through some of its largest enterprises, including state oil producer OAO Tatneft with nearly 30%, OOO Iks Luch with nearly 20%, OOO Ak Bars Holding with about 18%, and petrochemicals enterprise OAO Nizhnekamskneftekhim with 7.5%.
Rapid growth
Ak Bars has grown rapidly in recent years to become Russia’s 13th largest bank in terms of equity and 17th largest in terms of assets. Last year, the bank’s assets rose 89% to Rbs72.3bn ($2.7bn), while its liabilities more than doubled to Rbs63.3bn. The bank also raised $175m from its debut Eurobond issue after its initial offering of $150m was oversubscribed.
Meanwhile, its equity grew 38% to Rbs13bn, giving a capital adequacy ratio of 19.4%, though provision for possible loan losses dropped slightly below par. The bank made a net profit of Rbs505m for 2005, a 9% rise on 2004. Moody’s rates the bank as Ba3 for long-term credit and E+ for assets, while Fitch has upgraded the bank from B- to B+ for long-term credit and from D/E to D for individual credit over the past two years.
Although corporate banking forms a large and growing part of its business, ABB sees greater potential for growth in retail banking. Since 2002, its private client base has tripled to 1.4 million. Meanwhile its corporate client base has soared by 50% to about 27,000, a growth Mr Minnegaliev attributes to ABB’s ability to deliver a wide range of services tailored to specific client needs at any of its offices.
Expanding network
ABB has a local network of 20 branches, another 13 spread across Russia and 28 foreign correspondent and partner banks. Rapid expansion is under way, with 137 branches or offices and a further 290 credit-cash outlets planned for Russia by the end of 2006.
Last year, ABB launched several new retail savings products, boosting the number of private accounts held at the bank by 58%. It has developed a portfolio of commercial and domestic mortgage and loan products, while more than 300,000 ABB-branded Visa and MasterCards are currently on issue, though most of the Rbs4.1bn drawn on them in 2005 was in cash not in credit or direct debit transactions.
As the leading bank in Russia for loans to small and medium-sized enterprises, ABB typically makes loans of Rbs1m-Rbs2.5m, which attract interest and commission of about
14%-19%. It recently extended its services into pension credits, payroll projects and payment orders to suppliers.
Among its corporate banking activities, ABB is engaged in the interbank market; trades securities for itself and as a broker; manages corporate and private assets (in association with management company Ak Bars Capital); raises syndicated loans for export and import contract financing; and has a successful project financing division that focuses on projects in Tatarstan.
The bank also conducts precious metals operations. In future, says Mr Minnegaliev, as well as expanding its branch network throughout Russia, ABB plans to establish subsidiary companies for start-ups, finance and leasing under the Ak Bars brand.
