The bank is changing its management model

MDM Bank is changing its internal management structure - from centralized to territorial. As part of these transformations, the bank abolished the positions of heads of corporate and retail areas. Market participants were skeptical about the new business model. So far, numerous structural and personnel changes at MDM Bank have not led to an improvement in its financial performance.

The fourth territorial bank, Stolitsa, was formed within the structure of MDM Bank. Nikita Ryauzov, who previously headed the corporate-industry block, was appointed its head, Kommersant was told at the bank. Thus, today MDM Bank is conditionally divided into four territorial units: “Capital” (Moscow and St. Petersburg), Ural, Siberian and European territorial banks. As the bank clarified, the new structure has already been institutionalized. Structural changes are associated with the bank’s transition to a new decentralized business model and actually mean the abandonment of a single management of the corporate block. MDM Bank resigned from the position of head of the retail division back in the summer. Now the heads of both territorial banks and local branches will oversee all areas of business.

“The center for making financial decisions is being moved to where the client is directly served. Thus, the abandonment of centralized management of the corporate block is dictated by the desire to comprehensively satisfy the needs of clients and more effectively carry out cross-sales, taking into account the regional specifics of the business,” explains Mr. Ryauzov. “Combining corporate and retail business within the territorial bank will allow us to offer retail products to our corporate clients."

For Russia, such a business structure is atypical. “I can’t remember a single example of a complete abandonment of the specialization of managers in business areas,” says Andrey Donskikh, deputy chairman of the board of Sberbank. According to him, at present the market is more characterized by deepening diversification - up to the specialization of the network to work with individuals and legal entities. “Selling such different products as corporate and retail requires great skills and abilities from the seller,” explains Mr. Donskikh. “When responsibility for the overall results of a bank’s territorial structure falls on its head, this is normal practice. However, the complete absence of unified management of business areas at the bank level as a whole is strange and, in my opinion, ineffective,” says Mikhail Polyakov, deputy chairman of the board of Nordea Bank.

After the merger with URSA Bank in 2009, MDM Bank experienced many personnel and structural changes. Experts pointed to them as one of the reasons for the low profitability of MDM Bank's business. The bank's net interest margin for the third quarter of 2010 decreased from 6.4 to 4.9%, for comparison: as of October 1, 2010, the net interest margin for Sberbank was 7.1%, for VTB - 5.6%, for the bank " Revival" - 4.5%. The results of decentralization of management of the retail block are still difficult to assess. According to the bank's reporting under IFRS, for the third quarter of 2010, the bank's retail loan portfolio decreased during the quarter by 4.4%, to 71.9 billion rubles, while the total portfolio increased by 5%, to 250.7 billion rubles. The quality of the loan portfolio improved (the share of non-performing loans in the portfolio in the third quarter decreased to 15.8% against 17.5% in the first half of the year), but the decrease in the share of overdue loans was largely due to write-offs (by almost 3 billion rubles) and sales (by 1.04 billion rubles) loans.

Daria Yurischeva

MDM Bank management leaves for the regions