Alfa Bank was registered in Moscow in January 1991. The bank was established by famous Russian businessman Mikhail Fridman and his partners. The lending institution has been a member of the national deposit insurance system since December 2004. In 2014, the Bank of Russia decided to rehabilitate Bank Baltiysky. Upon results of the financial institutions inspection conducted in 2014, the Deposit Insurance Agency rehabilitation launched rehabilitation procedures. After winning the relevant tender in August 2014, the Bank of Russia announced Baltiysky Banks rehabilitation with the participation of Alfa Bank. So Baltiysky Bank PJSC became part of Alfa Bank Banking Group. Separately it should be noted that this is the first bank that Alfa Bank was allowed to rehabilitate since the 2008 crisis when it rescued Severnaya Kazna. Initially, according to media reports, Bank Otkritie, MDM Bank, B&N Bank, Vneshprombank and Novicombank, in addition to Alfa Bank, were among bidders for the banks rehabilitation. DIA lent Rub 57.4 bln for a 10-year period at 0.1% o rehabilitate Baltiysky Bank which became necessary following a multi-year conflict of its owners. The Bank of Russia provided DIA with these funds. The rehabilitation program suggests the bank will become part of Alfa Bank until 2020. For this purpose, Baltiysky Banks capital will be reduced to Rub 1.00, and after recapitalization Alfa Bank will become a majority shareholder of the under-rehabilitation bank. The capital reduction to Rub 1.00 is provided for in the rehabilitation law.
As of January 24, 2017 the banks shareholder was AB Holding OJSC (99.89%), which is owned by Alfa Groups ABH Financial Limited (Cyprus) that is controlled by ABH Holdings S. A. (Luxembourg), with the remaining 0.11% held by Alfa Capital Holdings (Cyprus) Limited. Beneficial owners of ABH Holdings S. A. (Luxembourg), the primary owner of ABH Financial Ltd., are Alfa Group* co-owners Mikhail Fridman, Herman Khan and Alexey Kuzmichev (who control 32.86%, 20.97% and 16.32%, respectively), and also the banking groups board chairman Petr Aven (12.4%), and Andrey Kosogov (3.67%). Also, a 9.9% stake is in the hands of UniCredit S.p.A. (free float), with another 3.87% stake controlled by a charity trust established under the laws of Cayman Islands (the shares are managed on trust terms in favor of charity organizations).
Russia-based Alfa Bank is the core of banking group Alfa Bank which also comprises banking business in the CIS (Ukraine, Belarus, and Kazakhstan) and the Netherlands (Amsterdam Trade Bank N. V.).
Alfa Bank is a universal bank serving around 381,600 corporate and over 14.2 mln retail customers as of June 30, 2017. According to the banks FY16 financial statement, the bank ran 733 offices, with a workforce of 21,300 (excluding Baltiysky Bank staff). The banks wide ATM network was broadened by those operated by partner banks (B&N Bank, Gazprombank, Credit Bank of Moscow, Promsvyazbank, Rosbank, Rosselkhozbank, and Urals Bank for Reconstruction nand Development) using which Alfa Bank customers can withdraw cash on the same terms as via Alfa Bank ATMs.
Alfa Bank expands operations as a universal financial institution with a focus on corporate and investment business, SME operations, trade and structured finance, leasing and factoring services, retail business (including consumer, cash loans and credit cards, savings accounts and deposits, remote channels of service). In line with the banks annual report, the financial institution ranked fourth in the credit card market in 2016, with a portfolio of $1.1 bln. The bank is a member of the Russian Agricultural Ministrys program to lend agribusinesses at low rates.
The lenders customers are financial and investment companies, retailers, manufacturers and builders, fuel energy and O&G companies, government institutions and public organizations. The bank served and extended loans to such companies as Alrosa, Aeroflot, Pobeda Airlines, Sportmaster, Nazarovskaya GRES of Siberian Generating Company, Nizhpharm, Makfa, Alfa Leasing, Mospromstroy, Lenspetssmu, Element Leasing, Inter UEA, Mosenergosbyt, TDL Textile, NPK United Wagon Company, Design Institute Yuzhproektcommunstroy, Step Group (an agricultural division of AFK Sistema), TAIF Group, Novgorod Metal Works and Alexandrinskaya Mining Company (a RMC Group entity), gold miner Highland Gold Mining Ltd., Transfin-M, Evraz, Rolf, Vympelcom, S7 Airlines, etc.
Since the beginning of 2017 the banks net assets have increased by 7.7%, or Rub 189.8 bln, to Rub 2.6 tln by early October 2017. On the liabilities side, a main reason for a rise in grand total was a 22.8% jump in the funds held by corporate customers. Furthermore, retail deposits (+12.3%) also made a contribution. An increase in these obligations allowed the bank to repay over a third of inter-bank loans drawn. As regards assets, the credit portfolio (+14.1%) and inter-bank loans granted (+60%) grew the most in absolute terms. To increase assets under these items the bank, in addition to liquidity drawn, also tapped high-liquidity provisions (down by a third) and proceeds from the sale of some securities (-12.8%).
The lending institutions liabilities are well diversified, with 38.5% falling to the money of corporate customers, 28.1% to funds of households, banks funds (mainly inter-bank loans issued by commercial institutions) account for 6.1% of liabilities, roughly 9% falls to capital, issued bonds and 2.4% to promissory notes. The banks clientele is wide, consisting, in large part, of real estate developers, retailers and manufacturers. Payments of the banks clients are heavy, with monthly turnover ranging from Rub 3 tln to Rub 3.7 tln. The banks dependence on household funds is measured as moderate. The concentration level is conservative. As of June 30, 2017 ten major deposit holders of the bank accounted for 15.1% of aggregate customer funds (11% as of end 2016).
As of the balance sheet data, capital was slightly under Rub 300 bln (down 16.3% YTD) following the fulfillment of subordinated obligations.
The core of the banks net assets is the credit portfolio (62.3%), with another 12.2% falling to securities, high-liquidity assets and granted inter-bank loans account for 5.6% and 11.4%, respectively.
The banks credit portfolio is equal to Rub 1.65 tln. During the period under analysis it has expanded by 14.1% (up Rub 204.5 bln in absolute terms). Notably, 84% of the portfolio falls to corporate loans, and the remainder to retail loans.
The credit portfolio is mainly long-term, with 12M+ loans prevailing. As of the balance sheet date NPLs stood at 8.1% (9.8% at the begining of 2017), or quite a market average. Provisions against the portfolio are conservative (12.9% vs. 9.8% at year-start 2017), covering NPLs in full. The credit portfolio is collateralized by less than half (48% compared to 59.4% at the beginning of 2017) which is hardly sufficient. The portfolios concentration level is moderate. As of June 30, 2017 the banks 10 biggest borrowers accounted for 28% of aggregate loans granted before provisions (30.3% as of year-start 2017).
In line with the lenders 1H17 IFRS interim financial statement, the sectorial breakdown of the credit portfolio was as follows: retail loans (13% vs. 12.7% a year ago), oil producers (12.1%, 9%), retailers and trade firms (8.8%, 7.8%), commercial real estate (13%, 8.6%), financial and investment companies (8.6%, 8.8%), etc.
During the period under analysis the securities portfolio (Rub 323.4 bln) slid by Rub 47.3 bln, or 12.8%. Also, 97% of the portfolio is invested in bonds, Russian stocks account for another 1.7%, and the rest falls to promissory notes issued by corporate borrowers. In recent months, only around 10% of securities were collateralized against repurchase transactions as of balance sheet dates, with monthly turnover of repurchase transactions totaling roughly Rub 200 bln, or quite a little for the bank of this size.
However, Alfa Bank is quite a notable player in the inter-bank lending market on which it tends to borrow heavily (around Rub 1 tln per month in recent months). Separately, the lender is aggressive in the FX market, with conversion operations reaching Rub 10—15 tln per month.
The banks 9M17 RAS net profit amounted to Rub 9.7 bln vs. a Rub 11.6 bln loss in the year-earlier period. The banks FY16 net loss totaled Rub 5.1 bln, while net profit generated in January-September 2017 was derived on the basis of 2Q results, while in the first and third quarter of 2017 the bank posted losses (because of foreign currency transactions in 1Q, and in 3Q due to securities transactions, higher provision related costs and other cost items).
The Board of Directors: Petr Smida (chairman), Oleg Sysuev, Peter Aven (chairman of the banking group‘s board of directors), Andrew Baxter, Andrey Elinson, Andrey Kosogov, Alexey Marey, Mikhail Fridman, Oscar Hartmann, and Rushan Khvesyuk.
The Management Board: Andrey Sokolov (chairman), Mikhail Grishin, Alexey Marey (CEO), Maxim Pershin, and Alexey Tchoukhlov.
* Alfa Group carries on business in such sectors of the economy as commercial and investment banking, asset management, insurance, retailing, water supply and water disposal, mineral water production and sales, and also special investment situations. Its primary owners are Mikhail Fridman, Herman Khan and Alexey Kuzmichev.
In addition to banking business (in Russia, the CIS and the Netherlands), consortium Alfa Group controls or holds major stakes in the following companies: AlfaInsurance (insurance premiums totaled $1.37 bln in 2016), Alfa Capital (assets under management amounted to over Rub 178.3 bln as of December 31, 2016), Alfa Asset Management (Europe S. A. (manages assets of private and corporate customers in Europe), A1 (investment firm), X5 Retail Group (food retailing), Rosvodokanal, and IDS Borjomi International. As of December 31, 2016 the consortium had a workforce of over 240,000. Hide