This year, Oleg Tinkov showed what he is worth, breaking into the ranks of billionaires after the autumn IPO of TKS Bank. Along the way, he wiped the nose of the skeptics by building the fourth largest “card” business in the country without a single bank branch.

Text: Sergey Kashin

To assemble the TKS Bank team in 2006, Oleg Tinkov spent five to ten hours persuading each top manager. One can understand the people whom the entrepreneur himself called the best “card players” in the country: an eccentric dumplings and beer magnate invites professionals to a banking project that should shake the market.

How to become a billionaire

After selling the beer business and paying off his debts, as Tinkov himself told the SF , he had $80 million left. He saved $30 million for his children (the entrepreneur has three), and invested $50 million in the bank.

The investment project, as Tinkov immediately called his bank, was successfully completed in October 2013. The internal rate of return (IRR) was 81%. The exit was very loud, and this has a positive effect on the reputation of the team members, so they made the right decision. But the biggest winner, of course, was Oleg Tinkov himself.

Based on the results of the IPO, the entrepreneur’s capital can be estimated at $1.9 billion (Tinkov received 60.5% of the bank, valued at $3.2 billion, about $307 million in cash, the rest in shares). After the placement, Oleg Tinkov retains almost absolute control over the bank: he has more than 75% of the votes at the shareholder meeting.

Double credit

When Rustam Tariko created Russian Standard in 2001, and Oleg Tinkov created TKS in 2006, entrepreneurs turned to consultants. Tariko was hired by McKinsey, Oleg Tinkov - Boston Consulting Group. Both recruited good professionals from the market, listened and learned a lot. And both faced undisguised skepticism.

Tinkov himself, when asked how he found an idea for a business, said that he had been a client of Wells Fargo Bank since 1994 and after opening an account with the bank was no longer there. In Russia in 2006 there were five “credit cards” per 100 people—there was an immense amount of room for growth.

TKS directly copied the American Capital One. Not the only, but the most famous example of a card monoliner. Capital One bombarded potential customers with offers, amounting to 20 sales pitches per year per American.

This is exactly how TKS started in 2007. Then, however, it turned out that the underdeveloped Russian Direct Mail market did not allow it to maintain the required growth rates, and the sales model had to be changed.

In general, a monoliner is a less stable model than a universal bank. Western monoliners did not pass the test of the financial crisis: most were purchased by “station wagons”. TKS Bank is no longer an orthodox monoliner either. True, the sin is still minor: it accepts deposits. There are still zero branches.

TKS, due to its ridiculous size even at the time of the crisis, came out of trouble unscathed. Oleg Tinkov only had to give up some share in the capital for financial injections. In March-June last year, Tinkov launched television advertising without tightening the terms of delivery. A jump in the number of low-quality loans spoiled the indicators, but the situation was quickly returned to plan.

This is our homeland, son

It must be said that with its rapid growth, TKS Bank is also very effective. His interest margin—the difference between the price at which he attracts money and the price at which he lends it out—is huge. TKS borrows at 13%, and for clients the actual effective rate is 58%. It is on this 45% that they live. The bank's prospectus directly states that if clients become more sophisticated - wiser, more experienced, smarter - then this will negatively affect the bank's business. But blaming bankers for greed is stupid. After all, only competition effectively lowers prices.

Before the IPO, the bank got it from Russian analysts. There seemed to be no comment in the press without warning of a possible collapse. The IPO results showed that investors fundamentally disagreed with them. Georgy Chesakov, who was in the TKS team from the very beginning, created the IT platform and headed the bank in 2010-2011, and is now the managing director of OTP Bank, explains their position: “It is important that the bank received a high rating for the multiplier to profit, not to capital. Investors believe that the IT-centric, branchless model of conducting banking business is highly scalable.” According to him, there is one "but": scalable business models are highly valued only if there is a large, relatively untapped market. Therefore, TKS's valuation is, first of all, evidence that experienced international investors believe in the potential of the Russian market.

Faith was tested already on November 15, when a leak from the Duma revealed that one of the hundreds of amendments to the law on consumer lending, if adopted, would effectively destroy TKS Bank's business. They were talking about a ban on issuing cards outside the bank’s structural divisions, which TCS simply does not have. Despite the catastrophically low chances of such an amendment being adopted, the news brought down the bank’s stock exchange prices in London by almost 40%.

Convincing investors to buy bank shares at the price of an IT startup is still half the battle. Now Tinkov will have to prove to shareholders that the disaster was accidental and that it is possible to build a stable business in Russia, independent of the authorities. The task is not easy.

Cards, money, 2 yards