Translated material
Stanley Cup
Russian Morgan Stanley will buy Russian banks
“Preparations for the Rosneft IPO are proceeding according to planned plans,” said the head of Morgan Stanley, Rair Simonyan, at a meeting with reporters yesterday. “It is quite possible that the company’s shares will be of interest to the public, although much depends on how convenient it is to buy them.” The investment banker declined to comment in more detail on the largest initial public offering, citing the fact that his bank is one of the four main organizers of the IPO. Public offerings have become a calling card for the bank - Morgan Stanley conducted, in particular, the IPO of Sistema, Evrazholding, Pyaterochka, and NOVATEK.“Last year we did almost all the IPOs of Russian companies. Now everyone is vying to offer services to prepare for a public offering. Competition in the market is growing very quickly... We are forced to look for new products,” says Mr. Simonyan. The bank chose banking and real estate business as other niches. And the bank will work in them not as an intermediary, but as an independent investor.
“The new trends in our business are the desire not only to provide agency services, but also to invest our own money, therefore, along with offering agent services, we will invest our own funds in the purchase of some assets,” Mr. Simonyan said yesterday. According to him, Morgan Stanley can make investments in the real estate sector, as well as acquire portfolios of mortgages and consumer loans. “If we take mortgage lending, purely hypothetically we can buy a bank with a good portfolio,” said Mr. Simonyan, emphasizing that so far there is no talk of any specific transactions.
Interest in small retail banks as an investment object is now very high in Russia. Thus, in mid-April, the famous financier Boris Fedorov announced that his fund intended to buy 50% in a small bank in order to subsequently resell it to foreign investors. Morgan Stanley will apparently follow a similar strategy. Mr. Simonyan clarified yesterday that the new assets will under no circumstances be integrated into the bank’s business. "Morgan Stanley will not engage in commercial banking," says the investment banker.
Noting the high demand for banking assets, analysts note that it is quite difficult to find a credit institution in whose restructuring you will not have to invest very large funds. As Evgeniy Gavrilenkov, chief economist at Troika Dialog Investment Company, believes, “the business of purchasing small Russian banks will not be widespread, although you can always find two or three good credit institutions, especially in the regions.” However, these types of transactions are now very risky. “Formally, the banking business is developing very successfully. It is difficult to show bad results when the entire economy is growing, says Mr. Gavrilenkov. “This makes it difficult to objectively assess the value of credit institutions.”
As you know, now Russian banks wishing to conduct an IPO or sell a large stake to a strategic investor value their business at 2.5-3.5 times their equity capital. And yet, according to Mr. Gavrilenkov, even if you buy a bank now at such a high premium, in a few years you can make a decent profit.” “Perhaps investors are now trying to buy time - in a few years, good Russian banks will be worth much more,” says Nikolai Shitov, chairman of the board of the City Mortgage Bank. -- For example, the Polish retail bank Lukas was bought by the French group Credit Agricole with a ratio of 8.7 to equity capital. I think that this will become possible in Russia in two or three years.” According to Mr. Gavrilenkov, in two or three years the banking business will become noticeably larger, and many market participants will have to either leave or sell their business. “Some banks need to find new, larger owners now for further development,” says Mr. Gavrilenkov.
However, those credit institutions that are confident that in a few years their business will become much more expensive than it is now are not yet ready to sell to Western investors. “We would be interested in holding an IPO or selling the stake to a “strategist” in two or three years,” says Nikolai Shitov.
In addition to investing in the banking business, Morgan Stanley is ready to invest in real estate. Recognizing the high opacity of this market, the bank still expects to find a suitable asset for itself. According to Mr. Simonyan, before the end of the year, bond issues or even IPOs of companies operating in the real estate market may take place.
The bank intends to work more actively in other still free niches, where the margin remains quite high. In particular, we are talking about complex structural instruments - for example, Morgan Stanley intends to offer banks its services for the securitization of their loan portfolios (mortgages, car loans and consumer loans).