Russia's Otkritie collapse: the owners and the deals

Russia's Otkritie collapse: the owners and the deals
Anatoly Chubais was one of Otkritie's shareholders.
By Ben Aris in Berlin September 8, 2017

ED: this is the second in a series of three pieces looking at the collapse of Russian commercial bank Financial Corporation Otkritie and the implications for Russia's banking sector.

The Owners

Otkritie has an unusually diverse shareholder structure for a Russian bank and includes some of Russia’s most successful businessmen. These are not oligarchs in the traditional sense – men that made money from their close ties to government or by grabbing an oil company in the 1990s. The men are all wheeler-dealers who became rich from wise or timely investments. Still, they are all also able to do deals in the Russian context.

Otkritie played several roles. It is a real banking business with the second largest commercial bank deposit base and an active player on the securities market, but it also a convenient home for rich people’s money.

Oligarchs need a bank but most are shy of using the state-owned behemoths and basically giving their secrets away to the Kremlin. Many oligarchs set up their own banks — Nickel magnate Vladimir Potanin’s Uneximbank and later Rosbank, Mikhail Khodorkovsky’s Menatep, Mikhail Fridman’s Alfa Bank are some examples — but many more notable oligarchs have never owned a bank. A handful of leading Russian banks emerged to service this particular niche and Otkritie was one of these.

What is remarkable in the Otkritie story is that no one has mentioned young reformer and former deputy prime minister Anatoly Chubais’ name. Otkritie was for years considered to be Chubais’ pocket bank, as multiple sources have confirmed to bne IntelliNews over the years. Chubais was a shareholder until 2013.

The other oddity of the bank is its extremely close relationship with VTB Group, which owns 10% of the bank and financed many of the deals that made it so big so fast.

The shareholder structure remains opaque, but according to Russian language reports 66.4% of the bank's shares are owned by seven individuals or their legal entities. The biggest shareholder is now Vadim Belyaev, who has been working with the bank since 2001 (26.71%). The others are LUKoil investment vehicle IFH Capital (19.90%) and the Lukoil-Garant pension fund (7.06%); the bank’s general manager Ruben Aganbegyan (7.96%); industrial entrepreneur Alexander Nesis (7.34%); Russian financier Alexander Mamut (6.67%); and three members of its management, Sergey Gordeev (6.38%), Dmitry Sokolov (4.67%) and Alexei Gudaitis (2%).

• Anatoly Chubais

Vadim Belyaev and his partner, senator and real estate magnate Boris Mints, have been credited with starting the bank in 2006. However, until 2013 the bank was widely regarded as a vehicle for Anatoly Chubais.

A “young reformer” and former president Boris Yeltsin’s go-to man with the IMF in the 1990s, Chubais was a shareholder in Otkritie, a fact confirmed by a short announcement in 2013 announcing Chubais was selling out (to Belyaev and Aganbegyan it later emerged).

An economics professor by training and later a key figure in Yeltsin’s government, at the time he left Chubais was running the massive Rusnano state-owned corporate designed to promote technological investment in Russia.

Chubais shouldn't have had the money to be a major player in a mid-sized bank’s capital. Generally respected in the west, Chubais oversaw the notorious loans-for-shares privatisation in the mid-1990s and famously balked at allowing oligarch Boris Berezovsky to fix the privatisation of telecoms giant Svyazinvest. But he was close to the oligarchs and was caught taking a $100,000 “book advance” fee from Potanin in the 1990s. (Chubais eventually did write a book about the 1990s privatisations.)

Some commentators have speculated that one of the reasons the Central Bank of Russia (CBR) has been so lax in its regulation of Otkritie is that its current governor Elvira Nabiullina worked as Chubais’ deputy in the Committee on Economic Reforms in the 1990s and remains loyal to him. Certainly the CBR has been remarkably generous with Otkritie and given it ample funding to bail out other banks. Moreover, the central bank’s first deputy chairman Dmitry Tulin admitted in the last week of August that the CBR has “been aware of problems with Otkritie” for over a year, but did little to reign in the bank’s voracious appetite for acquisitions.

• Vadim Belyaev

Belyaev has been in the spotlight during the CBR’s take over of Otkritie and owns 28.6% of the stock. Trained as a ship engineer, he has been with Otkritie from the very beginning in 1997 when it was only an insignificant brokerage, before rising to director when it was transformed into a bank in 2001.

Belyaev has several connections to the Yeltsin administration. During the 1990s he met Boris Nemtsov, who was also a close associate of Chubais, playing tennis and they became partners in the real estate business. (Nemtsov was also caught in the book fee scandal.)

Belyaev has kept a low profile for the head of a prominent bank, but after Otkritie’s troubles became public in August he announced that he was returning to take over personally after a two year hiatus in an effort to shore up confidence.

“Recently, we’re seeing a reduction in trust in the banking system,” Belyaev said in a statement. “I believe the best way to increase trust is to lead by personal example.”

• Boris Mints

​Art buff Mints was an early investor in Otkritie. He is the link between Belyaev and Chubais, having worked closely with Chubais in the Yeltsin government as a board member of the Russian State Property Committee in 1994-1996 that oversaw many of the 1990s privatisations.

The State Property Committee was a notorious body that sold off much of Russia’s state property to entrepreneurs, making them millionaires overnight, but Mints was sacked from government by Vladimir Putin in 2000 after he became president that year.

In 2004, Mints founded the O1 investment company that specialises in real estate and is now the largest owner of offices in Moscow. (His son Dmitri is also in real estate, running the highly successful O2 high end real estate company.) Close to Chubais, Mints joined the board of directors of Otkritie the same year, when Belyaev was heading up the operation.

From 2005 to 2008, Otkritie invested in the development of Class A office buildings in Moscow, managed through the private equity arm of Otkritie Holding led by Mints’s son Dmitri.

For some reason that remains unclear both Mints and Chubais sold out in 2013 with Belyaev and banker/lawyer Ruben Aganbegyan buying their stakes. According to one version of the story, Mints defaulted on big loans he had taken from Otkritie, which provided the finance to start his real estate empire. But given Otkritie continued to rent its office space from O1 this is probably not true.

• Alexander Nesis

Nesis is an old school oligarch who built up his wealth in the shipbuilding and chemical industries. He is one of the few Yeltsin-era oligarchs to have smoothly transitioned to the Putin era with his business seemingly entirely unaffected by the change in power.

The empire began with the establishment of ICT (Investment, Construction, Technologies) company in 1993, which invested into shipbuilding and metallurgy, eventually taking over the iconic Baltic Shipbuilding Yard, where Nesis used to work as an engineer. He also has investments in a dizzying array of firms and sectors including stakes in gold miner Polymetal and potash producer UralKali. He co-invested in Nafta-Moscow, Nomos bank and Polymetal with financier Alexander Mamut.

His connection to Otkritie is his bank Nomos bank that IPO’d in April 2011 raising $718mn in the process and valuing the bank at $3.2bn. This is still the largest commercial bank flotation in Russia to date.

At the time, portfolio investors were very excited by the Nomos IPO, which was a rare offering of a mid-sized bank and so was a perfect vehicle for investors interested in getting exposure to Russia’s growing financial sector and its middle classes without having to invest into a state-owned bank.

The same investors were more than a bit miffed when its owners took Nomos private again a little more than two years later and sold it to Otkritie. The deal was financed with a $1bn loan from VTB and the two banks were merged to become Financial Corporate Otkritie. Minority investors were bought out at $14 per share, below the $17.5 the bank floated at.

Alexander Mamut

​Mamut is one of the most impressive businessmen in Russia. He can not be described as an oligarch as he didn't participate in the Yeltsin-era carve up of Russia’s industrial crown jewels and has not obviously fed at the trough of state spending that made most of his peers rich. He is better described as a financier, the Russian Warren Buffet, who simply keeps making great deals.

He got his start in 1990 by founding Imperial Bank that specialised in working with oil and gas companies, with clients that included Gazprom and LUKoil. He went on to found a successful supermarket chain Sedmoy Continent, was also an early investor in MDM Bank, one of Russia’s leading commercial banks, and bought Evroset mobile phone retailer in 2008 when its founder Evgeniy Chichvarkin fled into exile. He is a large investor into insurance company Ingostrakh and former investment bank Troika Dialog that was later sold to Sberbank. And so on… Mamut is serial deal-maker. His entry into Otkritie was via a stake he bought in Nomos bank in 2011 from Czech investor Petr Kellner when Nomos was taken over by Otkritie.

Ruben Aganbegyan

Aganbegyan is an ethnic Armenian, the son of the famous Soviet economist Abel Aganbegyan and loves to ride his giant Harley Davidson motorcycle around central Moscow during the summer.

Aganbegyan is the odd man out in this story as he is an actual banker and is the only shareholder that has had a hands on role in running Otkritie.

After graduating from Moscow State University he held a string of jobs in the early 1990s with international firms including PwC, Clifford Chance and Credit Suisse First Boston before joining Troika Dialog, then headed by fellow Armenian Ruben Vardanyan. In 2009 he was hired by Stephen Jennings of Renaissance Capital to basically sack most of the senior staff, before he was sacked himself.

He was quickly hired to run Russia’s leading bourse in 2010 and oversaw the revolutionary merger between the Moscow Interbank Currency Exchange (MICEX) and its sister exchange, the RTS, that has transformed Russia’s capital market.

He has great visions for the exchange and Russia’s capital market, telling bne at a dinner with board members of the Blackrock fund: “The problem with Russia is it needs to be transformed from a permission-based system to a permissive system. Now if you want to do something you need permission and if there is no rule you can’t do it. Better if you can do anything you want unless there is a rule against it.” But for reasons that are not entirely clear he was sacked again in 2012 after the merger was complete.

Looking for a new job, he bought part of Mints’ stake in Otkritie and took over as the chairman of Otkritie’s managing board. He has been chief executive officer of Otkritie Holding JSC since December 29, 2012, also serving as its general director.

Vagit Alekperov

​The founder Russia’s largest privately owned oil company Lukoil, Baku-born Vagit Alekperov has never owned a bank, but has been involved in several. He was secretly a shareholder in Nikoil, a leading investment bank in the 1990s that later through a series of mergers and acquisition transformed into today’s Uralsib. Alekperov’s participation was eventually revealed in a Eurobond prospectus that Nikoil founder Nikolai Tsvetkov, who began his career running Lukoil’s financial operations, was incensed to discover could be shared with journalists.

Alekperov’s move from Nikoil/Uralsib to Otkritie — alongside his partner Leonid Fedun, who is co-owner of the IFH Capital — is partly because Uralsib got into trouble, but also because Tsvetkov was more than a little crazy. Multiple market sources told bne IntelliNews that Tsvetkov, who had worked his way up through the LUKoil ranks, was obsessed with a Russian new age self-help guru named “Sun Light” who taught aliens were challenging information to earth into a “golden triangle” and forced senior members of the bank to report financials that were in tune with the triangle amongst other bizarre behaviour.


​The most intriguing of Otkritie’s shareholders is VTB, which gained a 10% stake after a loan went bad. There has been constant speculation that VTB would buy Otkritie — and reports that Belyaev wanted to sell — but VTB has always said it is not interested.

To an extent Otkritie appears to act as an errand boy for VTB, doing deals that that the state-owned behemoth doesn't want to do itself. The most notorious was when Otkritie facilitated a repo deal set up by VTB on behalf of Rosneft in 2014. Both Rosneft and VTB had been sanctioned at this point but the oil company needed tens of billions in hard currency to pay off loans. In a ruble/dollar bond swap Otkritie provided the money and doubled in size as a result. Some observers say the deal caused the collapse of the ruble that winter and tellingly the CBR must have been aware of what was going on.

VTB doesn't have the same sort of relationship with any other bank, nor does maintaining the stake make much sense from a business perspective. 

The Deals

Otkritie has run aground because it has been trying to grow too fast and bitten off more than it can chew. While there seem to be multiple problems with the bank, two deals in particular – the acquisition of insurance company Rosgosstrakh and the rescue of Trust Bank – significantly worsened the bank’s health. The Central Bank of Russia (CBR) decision to nationalise the large commercial bank Jugra in July lead to panic in the market and deposit withdrawals that are believed to have finally tipped Otkritie over the edge. However, there were many other deals, the most important ones are outlined below.


Otkritie signed off on a deal to take over the iconic insurer Rosgosstrakh, a Soviet-era holder, in March this year. One of the biggest insurers in the country, the company is loss-making as it tries to reduce its exposure to the mandatory car insurance business, which has become less attractive in recent years, amongst other sectors. The process will take several years to complete but in the meantime Rosgosstrakh has to continue paying out on old policies and funding these payments with the receipts from a falling number of new policies.

Rosgosstrakh just reported first half financials with a loss of RUB23.6bn ($406mn), up three-fold from the same period a year ago when it lost RUB8.7bn. The payments are also straining the company’s cashflow, as it had to make some RUB54bn of payments in 2016 and the same again or more this year. Experts believe that the company’s loss will increase in the coming years and could hit RUB100bn-RUB150bn.

In August, the CBR said it had started to look at Rosgosstrakh’s situation, but while the mechanisms for bailing out bust banks are well developed, they haven't been created for insurance companies yet.

Despite all this Otkritie raised its stake in Rosgosstrakh to 19.8% from 4.4% in March and in August the Federal Antimonopoly Service allowed the bank to buy 100% of the insurer and immediately up its stake to 51.1%. Central Bank First Deputy Chairman Dmitry Tulin told reporters on August 28 that it was the completion of this deal that did the fatal damage to Otkritie.

“Rosgosstrakh is not the only reason [Otkritie got into trouble], but it became some sort of a trigger that acted as a catalyst of the process… The bank's spending to finance this event exceeded expectations of the owners of the Otkritie group significantly. The bank spent a significant part of its liquidity on this deal,” Tulin said.

Otkritie had already started financing the insurer before the takeover was complete and was in a rush as the acquisition was being financed by a $600mn loan facility from VTB that expires at the end of this year, according to press reports.

Trust Bank takeover

The other big deal that ended up earning Otkritie more pressure than profits was the rescue of Trust Bank. Originally set up by oil oligarch Mikhail Khodorkovsky, the management bought out control following Khodorkovsky’s arrest in 2003 but went on to pillage its deposit base.

Trust got off to a good start during the boom years, selling itself as a westernised commercial bank and its CEO Ilya Yurov gave multiple interviews to bne. It even famously hired Hollywood actor Bruce Willis to be the face of its PR campaign. But after the crisis broke the management began to pillage its deposit base. Yurov was arrested while in transit through Ukraine on his way to London where his colleagues live at the end of last year, amazingly at Russia’s request. The CBR is trying to recover credits taken by the former shareholders reportedly worth $1bn.

In the middle of his mess the CBR gave Otkritie the job of rescuing the bank as well as a soft loan of RUB127bn ($2.2bn) to fund it. The regulator’s deputy chairman Vasily Pozdyshev said at the end of August that Otkritie botched the job.

“Another strategic weakness of the group is a not completely successful bailout of Bank Trust. In general, we have a case here of a bailout creating problems within the turnaround manager itself and within the financial recovery of Bank Trust,” he said.

The management of the bank made several strategic mistakes and now Trust Bank needs even more help from the central bank, according to Pozdyshev. To make matters worse, when Otkritie itself got into trouble this summer it took a RUB80bn loan from Trust Bank, the bank it was supposed to rescue.

Some commentators have speculated that Otkritie only took on the job to get access to Deposit Insurance Agency (DIA) and CBR soft loans that were then stripped out again in the form of related party lending and other scams. Certainly the story is an odd one as the CBR oversight of the whole process seems to have been very lax. Moreover, as CBR officials said the same week that they knew Otkritie was already having financial problems the choice of Otkritie as a suitable white knight was questionable in the first place.

• RCB Cyprus and Nomos Bank

Trust was not the only bank Otkritie took over. In 2014 it bought a 19.8% stake in the Cypriot lender RCB from, inevitably enough, VTB Group.

Otkritie sold the state again at the end of August for $100mn as it rushed to raise money, saying that the investment had always been a strategic deal. However, commentators speculate that the bank allowed VTB to circumnavigate US and European financial sanctions on VTB with Otkritie acting as a circuit breaker – a charge that all those involved in RCB deny.

Today’s FC Otkritie is actually the result of the 2012 merger of a smaller Otkritie bank and the mid-sized Nomos Bank, which belonged to another shareholder, Alexander Nesis. The deal miffed investors as it took place at a lower price per share than at Nomos’ IPO only a year earlier. (see Nesis profile for details).

Before it got into trouble Otkritie held RUB3.3 trillion ($56.8bn) in assets, more than all but the biggest three state lenders, Sberbank, VTB and Gazprombank.

• LUKoil-Garant pension fund

Otkritie owns several pension funds and was in the middle of buying LUKoil-Garant, which provides pensions for the staff of the oil company, as well as others.

This pension fund is one of the structures under the control of LUKoil CEO Vargit Alekperov, who is a major shareholder in Otkritie. The fund also owns 7% of Otkritie in its own right as well as 8% of Rosgosstrakh. In the midst of the August crisis the Federal Antimonopoly Services (FAS) gave Otkritie permission to buy the rest of the fund. Otkritie’s senior management already make up most of the pension fund’s board and advisory council.

The concern is that Otkritie could use the funds in the pension funds for its own commercial ends rather than investing them wisely for the benefit of their customers as the oversight of the fund is all under the control of Otkritie shareholders.

Bond deals 

More than anything else two sets of big bond deals were responsible for massively expanding the size of Otkritie almost overnight.

Otkritie became Russia's largest private bank in late 2014 by buying RUB625bn ($13.5bn at then exchange rates) in bonds from the state oil company Rosneft and using them as collateral to obtain reverse repo loans from the CBR, before passing the dollars to Rosneft, which is not allowed access to international capital markets due to western sanctions. This deal was initiated by VTB and Otkritie doubled its assets on a single trade.

The deal was so big that it was blamed for starting a run on the ruble that saw the national currency halve in value in a few weeks. Indeed, the deal raises a lot of questions. Given Otkritie had to use the CBR’s repo facility to convert the rubles to dollars, the regulator must have been well aware of what was going on and the likely impact on the exchange rate given the massive size of the deal, but did the deal anyway.

In the other big trade, which was much more traditional, Otkritie snapped up about three quarters of the Russian 2030 sovereign Eurobonds during the crisis when they were cheap using borrowed funds to become the largest holder of the paper.

This article is part of the cover section in bne’s monthly free magazine. You can read the whole issue here and sign up to receive the magazine by email each month by filling in the form here