The investment banking arm of Russia’s fast-growing Otkritie Financial Corporation is looking to open its first Asian office in the second half of the year. Vadim Belyaev, Otkritie Capital’s new chief executive, announced plans to launch a Hong Kong office in an internal meeting last week.
According to Alexey Karakhan, deputy CEO of Otkritie Financial, the firm has yet to apply to the Hong Kong SFC for the requisite licences, although it will do so in coming months. The firm is currently consolidating recent growth initiatives in Russia across its insurance, retail banking and asset management arms. But it is looking to build on the success of its international investment banking division.
In London, through its subsidiary Otkritie Securities, the firm is the number one trader of Russian shares, with 25% of the daily volume, says Karakhan. The brokerage mainly focuses on DMA and electronic trading, and offers clients an easy way to get direct access to Russia risk. It has been investing in the technology needed to offer clients these services. As a result, profits for the group as a whole came in lower than expected last year, due to the investments it has made on the Otkritie Capital side.
Otkritie will be the latest Russian bank to open up in Hong Kong. At the beginning of the year VTB Capital announced that it had hired Damian Chunilal, the ex-head of investment banking at Merrill Lynch Asia-Pacific, to spearhead its push into the region’s capital markets. RenCap similarly has been making big investments in the region in recent years, as it seeks to broaden out from its Russian heritage.
The opportunities for Russian banks will be largely centred around securing Asian capital into Russian projects. According to economists, trade between Russia and Asia is still limited, especially compared to Europe. Until China and Russia agree on the price at which oil and gas will be exported through an as yet unbuilt pipeline, trade is likely to remain limited. But that does not mean there will not be opportunities for financial cooperation.
“The capital flows between Russia and Asia are more important than the trade flows at the moment,” said Evgeny Gavrilenkov, chief economist at investment bank Troika Dialogue in Moscow, speaking on the sidelines of the firm’s annual Russia Forum. “We will see greater integration on the capital account.”
Gavrilenko expects to see more Russian companies tap Asian investors through IPOs and bond deals this year, not least through the government’s ambitious privatisation programme. The Russian government is also looking to attract Asian banks and financial institutions into Moscow, as part of its efforts to build an international financial centre.
But not all Russians are coming. Russia’s biggest bank — state-owned Sberbank — told FinanceAsia in Moscow last week that while it was attracted by Asian opportunities, it would not be seeking to buy any Asian institutions. The bank has been making an aggressive push into the markets of Central and Eastern Europe but it is not planning to replicate that strategy in Asia.
“Our M&A activities have so far been focused on Europe, although we have established a rep office in Beijing,” said deputy chairman Anton Karamzin at the sidelines of a Sberbank/Troika Dialog investment conference in Moscow. “The prospects for growth in Asia are very attractive, but it will take a bit longer for us to find our way into that growth than in Europe.”
