17 Dec 2014 — black day for the Russian financial system. The CBR sharply increased its key interest rate by 6.5 percentage points to 17%. The exchange rate was high, the market began to panic. The regulator has introduced unprecedented measures to support banks, which took a week of “patching up holes”, attempts to stop the outflow of deposits and to maintain a balance. Then Мoody”s the first of the three international rating agencies announced the potential introduction of the government moratorium on the repayment of foreign debts. Moody’s also did not rule out the government default on its own obligations, and the Agency S&P put the sovereign rating of Russia on review with a negative Outlook in the direction of the “garbage” zone.
25 Dec 2014, foreigners went on vacation, and came back a week later, started a massive sale of Russian securities. “On both sides of the Atlantic, investors threw off the paper at any price. The discount was 10%,” recalls co-founder, shareholder and first Chairman of Sovcombank Sergey Khotimsk.
The Supervisory Board of Sovcombank gathered on 29 December, looking at the 30 largest issuers on the establishment on them of limits. From 2 January 2015, all Bank Treasury worked from morning until late at night, buying up paper at the bottom. From 2 to January 10 Sovcombank bought bonds for $500 million already by the end of January due to a rise in the securities price, this strategy brought the Bank a profit of $50 million.
“We’re not the only one who worked in those days. But banks managed to increase the limits and to ensure the work of the Treasury, seven days a week, almost was not. A lot of papers bought, for example, Russian oligarchs with their private Western accounts, ” says Khotimsk. Why? Because they have the decision-making system instant. They are masters of their money, they make decisions quickly and effectively. Here we are to the money of the Bank are prudently”.
On January 1, 2016, the Bank took 20-th place by assets (523,6 billion rubles under RAS), rising over the year by 20 positions, ahead of Citibank and came close to the “Russian standard”.
Assets increased largely due to the securities that make up almost half of the Bank’s assets: mostly bonds. In 2015 the bond portfolio has increased 2.5 times, up to 227 billion rubles. The volume of granted interbank loans increased from almost zero to 77,1 billion rubles Portfolio of loans to companies in 2015 rose more than ten times almost zero.
Profit Sovcombank for 2015 increased 18.5 times to 19.3 billion RUB Total amount of dividends paid by the Bank for the year 2015 amounted to RUB 3.5 billion.
Source: statements of Sovcombank’s IFRS
Turn to the bankers
“The first business? In 14 years, the money was behind the other people in the queue”, — recalls with a laugh, Sergey Khotimsk. In all seriousness, in the late 1990s, the graduate of International University in Moscow, was a small company, dealing with the registration of firms. A “real” business at that time was engaged older brother Dmitri, who was co-owner of the holding, consisting of several plants: meat, milk and bread. Sergei sometimes had to help my brother to buy assets. In particular, it purchased its participation dairy plants in Novosibirsk and Volgograd was subsequently sold to the companies “Wimm-bill-Dann and Unimilk.
In 2001, at the age of 23 years, Sergei, together with his friend Michael Klyukina bought in the Kostroma region Buycommand. The Bank was founded in 1990 in Buje, there were about ten people. Plan seriously to engage in banking business was not recognized Khotimsk. “The idea was to buy a Bank in the region of $200 thousand, transfer to Moscow, to obtain a General license, and sell for $1 million Pure speculation, — says Sergey. — A million — it was for us some kind of infinite money, as it is now the perception is probably a billion”. The plan is simple, but there was no money, he adds: “I Have $25 thousand and Misha [Klyukina] — $25 million, and had $300 thousand. Khotimsk and Klyukin began to look for partners. Among those who decided to enter the draft, was the founder of the gallery “SOVKOM” Yuri Tyukhtin. Chairman of the Board was Nikolai Zhuravlev, later the leader of the regional branch of “United Russia”, who care owned slightly less than 2%. In 2011, Zhuravlev became a Senator from Kostroma region and left this post to talk with and he refused.
The money was eventually collected, the Bank bought, but the speculation failed. “To pull this off we had planned for six months. However, the “on the road” we fell in love with the banking business and remained in it forever” — says Khotimsk.
In the spring of 2004, Buycommand renamed to Sovcombank, received a General license from CBR, but 2007 was far outside the first hundred banks specializing in small and medium business. Wanted to earn more, but in the corporate sector to compete with small regional Bank was unrealistic, khotimsky said. “We realized that we learn how to effectively attract depositors’ money. We had good liquidity. The question was, where the money to place with maximum benefit,” he explains. And Sovcombank decided to become retail.
Co-founder and first Deputy Chairman of the Board of Sovcombank Sergei Khotimsk
Photo: Sasha Maskov for
A speeding train
In 2007, Sovcombank then took another large Israeli group Kardan. In Russia it is owned by the Bank “the Regional credit” and credit broker arch with a large office network in the Urals. Kardan broker wanted to sell.
Before the crisis of 2008, mortgage brokers were in Vogue: they were the intermediaries when lending to individuals and well known consumer audience, but not engaged in Deposit. Sovcombank and Kardan decided that can be useful to each other. In June 2007, the owners of Sovcombank and a member of Kardan, a Dutch company TBIF Financial Services BV has agreed to establish a holding company. Sovcombank became the 100% owner of group arch, Kardan received half of Sovcombank, making his capital a total of $65 million in cash. Taking into account of the valuation of arch Israelis paid for 50% of the pot, about $100 million, says Khotimsk.
In 2008, immediately after the purchase, the arch, the owners of Sovcombank decided to abandon the small and medium business and focus on retail, thought that the model of monolayer will be the most cost-effective. “Frankly, we were not experts in the retail brand. We had the feeling that it is good people who we bought the business. We have used their base competencies, skills, technologies,” — said the first Deputy Chairman of Sovcombank. The 2008 crisis showed that the new business works is not as good as I would like. Kardan this crisis crippled: if in 2007 the market capitalization of the group reached $1.5 billion, in June 2016, it was $94 million, the Israeli group went out of Sovcombank in 2012, selling its stake Khotimsk and partners for $130 million.
“We were in a speeding train: here we are in retail, risks grow, too, loss, around a huge number of large competitors and we are small, that is trying to do,” recalls Chairman and co-owner of Sovcombank Dmitry Gusev, a fellow student of Michael Klyukina at the Financial Academy under the RF Government, which came to the Bank in 2007 from Deloitte. He is responsible for organizational matters of the business, Sergey Khotimsk for operating, control Bank together.
Sovcombank also faced with the fact that all profitable niches in retail were already occupied: the country has actively worked retail banks such as “Russian standard” “East Express”, home Credit and Finance Bank. “Russian standard” in 2009, according to its annual report, was one of the leaders of POS-lending (loans for the purchase of goods, which are issued to the population in retail outlets). As at 31 December 2009 loan program “Russian standard” was presented at 27.3 thousand retail outlets in almost all regions of Russia, stated in the Bank’s annual report. “Home Loan”, according to statements of the Bank at that time was 32.8 thousand points of sales at stores in more than 1,200 cities. The “Orient Express” had 360 offices in 38 regions. The main emphasis, according to the press service of the “East” were made on small towns with a population of 60-150 thousand.
The Chairman of the Board and co-owner of Sovcombank Dmitry Gusev
Photo: Vladislav Shatilo/
In turn, the owners of Sovcombank went in a very small town with population from 5 thousand to 100 thousand people, choosing those where there was no competition. The Bank has created a mini-office area of 7-10 sq. m (at “the Russian standard” in these years was the office area of 100-150 square meters, the “East” — 50-60 sq. m). In fact it is just a table, chair, employee, and two machine for receiving and issuing cash — cash in and cash out, explains Gusev. “Then it was a revolution,” he says, ” you see, the offices of 100-150 sq m and 7 sq m is very different payback.
According to Gusev, the point of Sovcombank was worth less than 1 million rubles. “for example, we made the office in the wrong place, made a mistake and after three to five months realized that it does not bring us any money. So what? Took the vehicles, broke the lease and moved to another point. Pay off the point of one deal per day”, — says the Chairman of the Board. Still 70% of Sovcombank located in small towns.
The second marketing decision Sovcombank was even more revolutionary: the Bank decided to give loans to pensioners — people who most of the other financial institution loans were not given. “Initially the market looked at us as fools. Colleagues twisted his fingers to his temple and said: how can you lend people in 75 years, they’re going to die?” recalls Khotimsk.
In fact, the rate for pensioners and the owners of the Bank made in 2002 when Buycommand became Sovcombank, he moved to Kostroma. “We decided that if we had the “Soviet” name, retired you trust us with your money,” explains Khotimsk.
Over time it became clear that seniors — good and loyal customers (now their share among all depositors of 76%). They are able to save money, carry them to the Bank, and they have disposable income which they can spend on the payment of interest on the loan, says the first Deputy Chairman of Sovcombank.
Not that loans for pensioners were not given none at all. For example, the “Orient Express” provided loans of the seniors — the age of a borrower to get a loan from the Bank was 65 years. “But some private loan product for this category of clients we haven’t launched,” — said the press service of the “East”. “Russian standard”, as told on condition of anonymity, a former top Manager tried to give POS-loans to pensioners, but realized that this type of loan is not uninteresting, and the interest rate “for the age”, which was considered high risk, was greater than that of younger clients.
Starting to work with Kardan, managers Sovcombank, raising statistics, I saw that loans pensioners take very little — they accounted for about 3% of all borrowers. “But we looked carefully: they all extinguish!” — said Gusev.
Category of pensioners and older people is fundamentally different from market average claims Khotimsk, is a much more disciplined and high-quality borrowers in all risk indicators. The adoption of the decision on the credit of a pensioner is very different, he explains: a client will think 100 times, why would you take out a loan for what will be his to give. And working pensioners, especially in the regions often have higher incomes than their working relatives.
“Then we just thought: if this is such good customers, how do we make it so that they took not a little, a lot? says Khotimsk. — Primitive thought: let’s try to advertise on TV. Then the money we had little, we could afford only a five second clip on the regional channels. The movie was this: “Loans to pensioners. Phone number. Sovcombank”.
A large-scale campaign on Federal TV channels, which was the actor Boris Shcherbakov, appeared only in 2010. But, according to Khotimsk and Gusev, even the first modest advertising came to fruition: in Sovcombank it is a huge number of customers. During the year, the proportion of pensioners has reached 40% in loans and has become the main driver of growth.
In 2012 Sovcombank came Andrey Spivakov, who has since heads retail. Andrew was a co-owner of the blocking stake and the first dynamically developing at the time of Altayenergobank. “So to persuade him to join our team had a few years”, — says Khotimsk. In the end, Spivakov has sold their shares and moved to Sovcombank. Exactly Andrew, emphasizes Khotimsk, managed to build a risk management system, which allowed the Bank to go into negative numbers at retail even in 2015, when the sale of loans fell by half.
“New savings Bank”
For pensioners in the sovkombank made everything from design to the manner of communication of employees with customers. “In a clear niche positioning, we are paying what we have with young people very hard. For example, we serve seniors of the queue, younger people hate it, ” says Khotimsk. — And they don’t customize: I can hear the story of how my daughter got sick, something happened. It does not create youth comfort in our office.”
In the offices of Sovcombank there is nothing striking fashion — specifically, khotimsky said: “In their appearance of the office should remind public enterprises”. To communicate with older people learn — the Bank employs about 50 coaches, staff trainings, participate in webinars.
Not able to be eliminated gradually, Khotimsk adds: “we Have if you are not very good indicators, you get very little, if good — very much. Those who are the result can not give, are under such pressure and earn so little that they themselves go.”
But seniors are becoming more advanced, and the Bank has a smartphone app called “Mobile savings Bank”. “This is a simplified mobile banking, redesigned the logic of the older generation. A few huge buttons, pressed one paid for the gas, pressed the other — has transferred the money to his grandson — gave an example of Khotimsk. We modified the savings Bank. We have to go forward, but several steps behind our competitors in using gadgets, fashionable terms, advanced products.”
Recently, Sovcombank, a dangerous competitor in this niche: March 31 of this year started the Post Bank, a new retail Bank, created by a group of VTB Bank and “Mail of Russia” on the basis of Leto Bank. Focus Mail Bank retirees. For two months, largely due to commercials with actor Sergei Garmash, brand awareness Mail the Bank has reached 50% of the company Analytics-Russia at the request of the Bank. The attendance of the Bank’s website during the advertising campaign increased by 60% and the number of requests to “Mail Bank” into a search engine “Yandex” has grown from 4 thousand to 130 thousand in a week, reported the Bank press service with reference to Analytics-Russia.
Khotimsk and Gusev recognize that to compete with the Bank, which plans to renew the 42 thousand post offices in the banking, would be very difficult. But Sovcombank thought about business diversification long before the launch of competitor and for a different reason.
Co-founder and first Deputy Chairman of the Board of Sovcombank Sergei Khotimsk
Photo: Valeriy Levitin/RIA Novosti
Risks of monolayer
Noticeable problems of the Russian retail banks began in 2014. In connection with the increase by the Bank of Russia key rate loans to citizens rose sharply, incomes began to fall, many borrowers stopped gently to make payments, which led to an increase in the delay banks. In addition, banks tightened requirements for borrowers, so began to issue fewer loans.
At the end of 2014 the losses under IFRS “Russian standard” amounted to RUB 16 billion, “Renaissance Credit” — 15.6 billion rubles., “Orient Express” — 10.7 billion, “Coherent” 7.6 billion “home Loan” — 4.5 billion, OTP Bank 1.8 billion rubles. was only Profitable Tinkoff Bank (3.5 billion rubles) and Sovcombank (1 bn).
At the end of 2013, Khotimsk and Gusev, according to them, summoned the branch Manager of Bank of Russia across the Kostroma region, where the registered Sovcombank. “Guys, you have a good Bank? Good. But with your business model, if you will stay “monolinuron”, it will be difficult to maintain with you a normal relationship. Too big risks, he says, and it only gets worse,” — told Khotimsk the content of the conversation. The Bank of Russia does not comment on operating banks.
Corporate investment unit owners Sovcombank decided to create back in 2012, proposing to lead this effort Michael Autukhou, at that time managing Director of the investment Bank “Opening Capital”. “I wasn’t ready to do a turn in his career. But the idea that will give me carte Blanche and I will be able to conduct business so as to best understand it, I since then never left,” says day.
Negotiations with it were conducted in several stages, and only by the middle of 2015, due out in Sovcombank to the post of first Deputy Chairman of the Board. A month had assembled a team of 40 people, which included experts from the Discovery, VTB Capital, URALSIB, ROSBANK. What kind of compensation promised Autukhou is unknown, but he and Sergei Khotimsk claim that money was not the main argument.
“Worked like a magnet our corporate culture: fast, flexible decision making, direct contact with owners — explains Khotimsk. Managers of the Bank are large, though not controlling owners. I run a Bank, Dmitry [Gusev] controls the Bank, my brother manages the Bank — and we’re shareholders, we make decisions.”
“Shareholders in Sovcombank are not “daily” managers are very closely involved in the management of the Bank through the Supervisory Board, adds Autukhou. Every limit, every decision — all though it passes through the Supervisory Board, but very quickly, zero slippage and bureaucracy”. The press service of “Opening” did not comment on his transfer, noting that it was his “personal decision”.
Bonds Sovcombank is engaged since 2009 in this direction originally posted Dmitry Khotimsk. Before the crisis of 2008, Dmitry had his own hedge Fund in the United States — IGI — engaged in stocks and commodities (for commodities). Russian stocks, the Fund has not worked, said his brother Sergei, but after 2008, Russia opened new opportunities in the field of bonds, Dmitry has left new York and returned to Russia. Now he is a shareholder in Sovcombank – him and Sergey owned about 40% of the shares (the brothers are the largest owners of the Bank), holds the post of Advisor to the Chairman of the Board and manages the Bank-owned portfolio of bonds with fixed income.
Who else owns Sovcombank:
In Sovcombank three types of shareholders. First, shareholders-managers. Second, shareholders who own relatively large packages and are actively working in the Supervisory Board. This, in particular, the Chairman of the Supervisory Council Mikhail Kuchment (former co-owner of network of shops “M. Video”, the owner of the network of furniture hypermarkets Hoff), co-founder of Sovcombank, Mikhail Klyukin, Alexey Fisun (owner of the project “Riga Land”). Third, the “passive” shareholders, which, says co-founder, shareholder and first Chairman of Sovcombank Sergey Khotimsk fully trusted “active”. The number of such shareholders, according to Khotimsk varies depending on the needs of the Bank in investments: “When we, for example, need to Finance the deal, while existing shareholders do not have enough money, we, as a rule, attract new private investors. Can draw on a deal five or six people, which then gradually out of our business with the prize.”
According to Cbonds, Sovcombank by the end of 2015 in the top five of the best organizers to market bonds and took the second place after “VTB Capital” at municipal locations. Such a result is the Bank known through advertising pension credit, managed to achieve just less than a year, and until 2015 Sovcombank was no organization of such placements.
Leadership organized market issues have long been stable, it consisted of the state Sberbank CIB (Sberbank), VTB Capital (VTB) and Gazprombank, says managing a bond portfolio “Raiffeisen Capital” Constantine Artemov. “To approach them — a major success for the private player,” he said. According to Cbonds, as of 1 January 2016 the volume of joint market offerings of Sberbank CIB and Sberbank were 208.8 billion rubles (market share to 15.9%), Gazprombank — of 174.5 billion rubles (share — a 13.3%), and Sovcombank — 111.3 billion rubles (market share of 8.5%).
After the events of the end of 2014, the Bank appeared and large corporate borrowers. “In fact, there was import substitution. Before Sovcombank could not go in the largest Russian company and say, “Let me give you a loan,” with us no one would talk,” hotimsky said. According to him, Sovcombank could not compete for the rates on loans with leading international banks, which had huge limits on Russia. “The fact that they did not pick up, rigidly controlled state-owned banks, something traditionally given to Alfa-Bank (largest private Bank. — ) “—adds Khotimsk, and the capital of Sovcombank are not allowed to discuss with major clients serious deal.
The fact that the foreign banks that lent to the largest Russian companies through syndications, Eurobond issues, private balances and funds of their customers left because of sanctions. State-owned banks can not or do not have time to refinance all of the banks the size of Sovcombank have the opportunity to enter into a relationship with the largest companies, khotimsky said: “What we used”. Now the Bank has a very large proportion of assets in loans of subjects of Federation, municipalities and the largest Russian companies: almost all of its corporate clients with state participation.
For the last two years the share of retail business in the Bank’s assets plummeted. Under IFRS, the assets of Sovcombank on January 1, 2016 was $ 468.1 billion rubles for two years they have grown in 3,8 times. Thus, if on January 1, 2014 the retail assets of the Bank stood at 49.4 per cent, in two years is 14.5%, although the portfolio of credits to natural persons during this time even increased. Corporate loans at the beginning of 2014 the Bank almost was not, whereas by January 1, 2016, they occupied for a quarter of portfolio assets. The share of securities in assets over this period increased from 35.6 to 44.2%.
Judging by the structure of assets, Sovcombank is not just a “Bank for pensioners”. What is the relationship between such diverse businesses as loans to the elderly, loans to large companies and municipal bonds?
“Our entire balance and the assets and liabilities consists of something associated with the state. Because in Russia everything that is not connected with the government, is very unreliable,” says Sergey Khotimsk. The rate for senior citizens is also a bet on the state, because it pays their pensions, and municipalities will not be abandoned to their fate even in the case of technical default, he develops his thought. In relations with business Sovcombank tries to focus on companies too big too fail, which the same government will not fall. Among these Khotimsk calls Severstal and AVTOVAZ.
Business Sovcombank is growing not only organically. In February 2014 the Bank for $200 million has bought 100% shares of GE Money Bank from GE Corporation. In March 2015, became the owner of ICICI Bank, which changed its name from Modern commercial mortgage Bank (SKIB), specializiruetsya on issuing and servicing of mortgage loans and providing Bank guarantees. It Sovcombank bought for $30 million In September 2015 Sovcombank became the turnaround Ekspress Volga Bank. This Bank is now ranked in the top 50 by assets. Previously, he belonged to the financial group “life”: its parent Bank was Probusinessbank, which in the summer of last year, the Central Bank withdrew the license, including due to the placement of money in “drawing” securities.
Plans Khotimsk and Gusev speak cautiously. “We don’t have the skills to develop a strategic plan for many years or some superparadise technology, — says Sergey Khotimsk. We operate from quarter to quarter. For example, two days ago we had a Board of Directors. I presented a strategy: it is 180 degrees different from what I presented three months ago. Then had plans to return to the small and medium business, but now I realized that once again formed a favorable environment in retail and it is necessary first of all to develop it”.
Differently, says Khotimsk, in Russia to do business is difficult. “The long-term plans suffer a collapse, not because they are bad, but because in Russia the situation changes very fast. We think quite primitive, quickly directing liquidity, capital and effort where in a moment of high return”, — concluded the co-owner of Sovcombank.
55 thousand rubles — the average loan amount for seniors in Sovcombank
$200 million worth of 100-percent stake in GE Money Bank Sovcombank bought the GE Corporation
50 trainers work with new staff of the Bank
7-10 sq. m average floor area of offices Sovcombank
70% of the Bank’s offices are located in small settlements