Alfa Bank merges investment bank with its corporate bank

By Jason Corcoran in Moscow

Russia’s Alfa Bank is merging its investment bank with its corporate bank into one division.

The new unit will be aimed at increasing Alfa’s ability to sell products ranging from loans to advice on takeovers to its 40,000 plus corporate clients. The move mirrors a decision taken by Citigroup in the aftermath of last year’s financial crisis.

Ed Kaufman, co-head of corporate and investment banking at Alfa Bank, told EmergingMarkets.me :  “It’s not a cost issue but a revenue opportunity. The client managers on the corporate banking side will be put together with the corporate finance team to offer the best products to our clients.”

Kaufman dismissed market rumours the group was closing its investment bank and said it had just posted its best two quarters ever. “There were a lot of trading opportunities in fixed income where we invested heavily and booked the profits. We have also done well in equities and made more money from making educated bets.”

Kaufman and Vladimir Tatarchuk, head of corporate banking, will co-lead the combined division.

Alfa, which is controlled by the billionaire Mikhail Fridman, employs 135 in its investment bank and 600 in its corporate bank. The group has already downsized in many areas of corporate and investment banking over the last year. “We would look to see how markets develop if there needs to be reductions or additions in any specific areas but there are no layoffs due to the merger,” Kaufman said.

The bank insisted there wouldn’t be any conflict of interest resulting from combining the two businesses. Kaufman added: “We do not believe that corporate bank relationship managers will be able to sell M&A or corporate finance products but they are a key part of the coverage model and will be trained to understand the products and also to know when they need to bring in product specialist.”

The president of Alfa Bank Pyotr Aven has been one of the most bearish commentators on the prospects for bad loans in Russia’s banking sector. Aven has warned that banks’ non-performing loans could rise to 30% of assets, from an estimated 10% today.

Alfa has clashed with the oligarch Oleg Deripaska over the restructuring of his aluminium-to-autos empire. Bloomberg reported on July 31 that Deripaska’s Basic Element unit is close to agreeing with Alfa on revising terms of $800m in debt.

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