Guy Norton in Moscow -

They say that wisdom comes with age. As the oldest of Russia's leading investment banks, Troika Dialog has also arguably proved to be the wisest over the course of a highly challenging 2008 for the Muscovite investment banking community, which was rocked to its very core by the capital markets slump in the final few months of the year.

First, wannabe merchant banking outfit KIT Finance had to be rescued from imminent bankruptcy by a government-sponsored bailout package, and then archrival Renaissance Capital was forced into a shotgun marriage with billionaire Mikhail Prokhorov's Onexim Group in order to save it from suffering a similarly ignominious fate.

By contrast, Troika continues to strike a defiantly independent note. "We're still here, we're still working and we're still competitive," says Jacques der Megreditchian, the firm's ineffably Gallic head of investment banking and global markets. He could also have added, "And we're not in hoc to either the Russian government or a Russian oligarch."

So amid the market mayhem of the fourth quarter when all around them seemed to be tumbling like ninepins, how is that Troika managed to emulate the feats of the hero of Japanese director Akira Kurosawa's film Yojimbo and remain "Last Man Standing in Moscow"?

For der Megreditchian there's a simple answer - stick to what you know and what you do best. "We avoided making the classical mistakes - we're a financial intermediary, not a prop trading operation or a hedge fund," he says, adding: "If the markets drop dramatically in a surprising way, the question I ask our traders is: 'How much money did we make today?' and not 'How much did we lose?'" Der Megreditchian goes on to explain that that while Troika is a leading market maker in cash equities, bonds, options and repo transactions, amid the market turmoil it only had a $40m open position in Russian cash equities - a tiny proportion of its $2bn or so of assets.

In terms of the prospect of increased competition from the investment banking units of Russian government-owned financial institutions such as VTB Capital or mooted greenfield ventures by Sberbank and Gazprombank, der Megreditchian remains sanguine about the competitive threat they represent. "There aren't too many examples of successfully combining commercial banking with investment banking," he says, adding that while the likes of VTB Capital may arguably have deeper pockets than Troika thanks to their sponsorship by the - for the moment at least - still cash-rich Russian administration, that in itself is no guarantee that VTB Capital will hoover up business from less well financially endowed rivals. "We've never had to use our balance sheet to win mandates," claims der Megreditchian. He says that the securities trading losses and loan writedowns suffered by VTB Capital in recent months have arguably already taken the gloss off its brand spanking new corporate image. He's also relaxed about the prospect of more competition on the horizon. "I have serious doubts about whether people would move to a start-up operation at Sberbank or Gazprombank in the current market environment."

Straitened times

Like all its rivals, though, Troika has had to cut its cloth according to the straitened economic and market circumstances in Russia, with staff levels pared to 1,200 from 1,600 over the course of 2008. "This is not an easy time, everyone is suffering right now. We are at the start of a new era for investment banking globally."

Der Megreditchian says that the formula for success given the current market turmoil is for investment banks to remain flexible and able to adjust to rapidly changing conditions. With the easy money days of the mid-noughties now firmly relegated to a thing of the past, he says it will be the investment banking players that can offer clients smart, innovative solutions to complex, difficult problems that will not only just survive, but will ultimately thrive when markets recover. "Good research is a big competitive advantage for Troika Dialog - we still have 35 people in research and so we have a very strong team which covers all the macro, sector and company-specific trends."

With regard to the vexed question of whether Troika can retain its independence in the face of the continued aftershocks from the global credit quake and associated economic slowdown, there's a confident, but pragmatic response, from der Megreditchian. "We think we can exist as an independent entity and have had held no discussions about a change of ownership," he says, but adds the important rider: "We are always open to outside investment."

Der Megreditchian remains insistent, however, that despite potential revenues from investment banking shrinking by the day in Russia, there's no prospect whatsoever of any fire sale of precious assets. "There'll be no forced sale and the current management will stay in control." That assertion was given real substance in mid-December when German auto giant Daimler agreed to pay a total consideration of $300m for 10% of Russian truckmaker Kamaz - a hefty 3-1/2 times premium to the stake's market value at the time. Troika controlled 54.4% of Kamaz prior to the Daimler sale.

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