Commercial Bank Vostochny was founded as Far East Regional Joint Stock Bank of Vneshtorgbank of the RF (Dalvneshtorgbank) in Blagoveshchensk (the Amur region) in May 1991. The bank joined the national deposit insurance system in February 2005. Since start 2006 the lending institution carried on business as Orient Express Bank (CB Vostochny), and in the fall of 2014 the bank turned into a public joint stock company (PJSC CB Vostochny, in brief).
In 2001, Sibacadembank (later Ursa Bank, now part of MDM Bank) became the banks shareholder and major partner. So Vostochny came into focus of banker Igor Kim who is famous for M&A deals and his partners. It was decided that the bank will grow via both organic growth and M&A deals. As a result, in the course of several years Vostochny took over a number of small banks, namely Etalonbank, Bank Dvizhenie, Kamabank, Rostpromstroybank, City Mortgage Bank, and Santander Consumer Bank.
Until 2010 Igor Kim was Orient Express Banks controlling beneficial owner, but a new shareholder turned up in November 2010. It was Baring Vostok Private Equity Fund that specializes in direct investment in Russia and other CIS member states. The financial institution bought a 20% stake in the bank, and later upped its holding to 30%. In June 2015, the investment fund also participated in the banks capital increase program (Rub 2.6 bln), investing around Rub 2 bln and doubling its stake from 33.88% to 64%. The banks additional shares were also purchased by Russia Partners (via Troite Investments Limited) that raised its stake from 6.97% to 16.08%. The additional share issue diluted other shareholders stakes.
In summer 2016, Uniastrum Bank bought into Orient Express Bank by buying half of the additional share issue (Rub 3 bln) and grabbing 24.9% of the banks capital. Plans to take two banks under one roof were announced as early as July 2016. The Orient Express Bank-Uniastrum Bank merger was fully accomplished in January 2017. Upon reorganization in the form of a takeover Uniastrum Bank ceased operations, and all rights, obligations and assets held by Uniastrum Bank with its network of branches were assigned to Orient Express Bank. Branches of the taken over bank continued operation under the Orient Express Bank brand. The banks large-scale reorganization had no impact on the banks top executive, and management board chairman Alexey Kordichev continued to run the lending institution. The merger with Uniastrum Bank made it possible to boost assets by 40%, and 40,000 SMEs were added to the merged banks clientele.
According to the list of persons who control or have substantial impact on the bank (as of May 4, 2017), the lending institutions beneficial owners are US citizen and board member Michael John Calvey who holds a 44.57% stake in the bank via Baring Vostok Managers Holdings Limited, Artem Avetisian (32% through Finvision Holdings Limited), Russia Partners (beneficial owners are Drew Guff (2.34%), George Siguler (2.34%), and Donald Spencer (1.82%)) controls 6.5%, Marina Ushakova and Grigory Zhdanov (2.26% each), board chairman Sherzod Yusupov (4%), Yury Danilov (4%), and Alexander Taranov (1.14%).
The banks sales network mainly covers eastern regions of the country (the Far East and Siberia). The lender runs one of the widest regional networks in Russia (over 900 offices of various formats carry on business in 317 cities and towns). In 2013, the financial institution was one of three banks with the broadest networks, trailing Sberbank and Rosselkhozbank. However, the bank slashed its network, shutting down nearly 500 offices in January-June 2015.
As of August 1, 2017 the banks network apart from the head office in Blagoveshchensk (the Amur region) consisted of eight branches (Khabarovsk, Krasnoyarsk, Saint Petersburg, Moscow, Nizhny Novgorod, Stavropol, Rostov-on-Don, and Ekaterinburg), 129 additional offices, four outside-cash-unit operating cash desks and 477 operating offices. As of March 31, 2017 the banks headcount totaled 9,113 (in line with 1Q 2017 IFRS data).
As a merged institution, the bank worked out a strategy for the development of a multi-pronged bank that will back SMEs and be retail-oriented.
Households are offered various lending programs, Visa-powered debit cards (with interest accrued on account balances and cashback options), a lineup of deposit products, diverse mobile, SMS and online services, insurance programs, money transfers (MoneyGram, Western Union, UNIStream, and Golden Crown), safe deposit boxes, options to pay utility bills, and currency exchange. Operations provided for businesses and individual entrepreneurs include cash settlement services, loans, bank guarantees, corporate deposits, payroll projects (Visa), currency control, and remote services.
In January-July 2017, the banks net assets climbed 43.8% or by around Rub 87 bln. As of early July 2017 the banks net assets amounted to Rub 285.4 bln. The merger with Uniastrum Bank helped Orient Express Bank make its way into Russias Top 30 banks.
During the above period the bank saw a sharp increase in liabilities, namely in household funds (+67.8%, or Rub 63.1 bln) and capital (+70,8%, or Rub 15.3 bln), and to a smaller extent in the money held by corporate customers (+13.8%, or Rub 2.1 bln). As regards assets, the corporate credit portfolio jumped the most from Rub 5.3 bln to Rub 38.2 bln (over 7x), followed by securities investment (+59.5%, or Rub 19.8 bln) and high-liquidity assets (+84%, or Rub 8.8 bln). The banks investment in fixed and intangible assets grew notably (up Rub 14.3 bln).
Funds of households prevail in the banks resource base (around 55% of liabilities). Most funds fall to deposits opened for 6 to 36 months. Corporate funds account for 6.1%. The indicator did not grow during the period under consideration, and equally consists of balances held on demand accounts and long-term deposits. The banks clientele is not very active, with monthly turnover under Rub 50 bln. Clientele concentration in the banks total customer obligations is low (deposit and check accounts of the banks ten leading customers accounted for 1.6% of total customer funds as of March 31, 2017) as retail funds dominate in the banks resources.
Equity (capital) accounts for around 12.9% of the banks liabilities. Capital includes subordinated loans that are issued bonds (two issues of dollar-denominated bonds for a total of $168 mln, and two issues of ruble-denominated bonds for Rub 5.2 bln). The maturity of these obligations range from June 2017 through May 2020. In May 2017, the banks Eurobond holders decided at a meeting to convert bonds and the subordinated loan worth $125 mln with a 12% coupon into perpetual bonds, with a yield rate cut from 12% to 10%. These changes allowed the bank to improve № 1.0 by 1.2%, and № 1.2 by 1.99%. As of July 2017, the banks capital adequacy ratio (№ 1.0) stood at 10.25% against the minimum 8% threshold.
The money borrowed in the inter-bank lending market accounts for 5.3% of liabilities, and funds are mainly borrowed from Russian banks for up to seven days under repurchase transactions. Proceeds from bonded loans account for 1.3% of net liabilities. Nearly all issued securities fall to bonds.
As for the asset breakdown, 53.6% falls to the credit portfolio, and another 18.6% to the securities portfolio. Other assets account for 12.5%, 6.8% falls to high-liquidity assets (mainly balances of cash in hand and on a correspondent account at the Bank of Russia), 7.3% to fixed and intangible assets, less than 1% to the money lent in the inter-bank lending market (including Rub 70 mln of overdue debt).
The credit portfolio is equal to Rub 152.9 bln, and has jumped 32.3% (or Rub 37.1 bln) since start 2017. This increase was mainly recorded in the corporate portfolio (up Rub 32.9 bln) which despite a sharp rise still lags behind the retail credit portfolio (75% of the total credit portfolio). The credit portfolio is mainly long-term. NPLs have been rising in absolute terms, and are currently recorded at 23% (the amount of impaired loans is assessed as too high). Meanwhile, provisions easily cover NPLs (33.3%). The banks credit portfolio is collateralized by 40.7%. The credit portfolio (pursuant to the banks FY16 IFRS financial statement) is marked by low concentration on the biggest borrowers as loans granted to the banks seven biggest corporate borrowers accounted for 5.9% of the total portfolio as of start 2017 (3.7% a year ago).
The securities portfolio amounts to Rub 53.2 bln, and has expanded by 59.5% (or Rub 19.8 bln) since the beginning of 2017. Bonds account for 86% of the portfolio, and 10.2% falls to stocks. As of July 1, 2017 securities that were collateralized under repurchase transactions accounted for 27.7%, 26% fell to corporate bonds, 32% to bonds issued by foreign companies, roughly 16% to OFZ and Bank of Russia Bonds, and 1.2% to banks bonds. The bond portfolios monthly turnover is fairly high, around Rub 150 bln.
In the inter-bank lending market the bank is moderate, both lends and borrows. During the period under analysis the bank was broadly a net borrower, raising short liquidity from Russian banks for short periods. The bank is aggressive when it comes to the conversion market, with turnover being as high as Rub 500 bln in some months.
In 2016, the bank suffered a Rub 4.2 bln loss (losses amounted to Rub 6.6 bln in 2015). In January-July 2017, the bank earned Rub 111.1 mln in net profit.
The banks primary income earners are interest and commission income. The lenders interest and commission income increased y-o-y mainly due to the merger with Uniastrum Bank. The banks costs incurred to compile loan loss provisions jumped 25% y-o-y in the first half of 2017.
Board of Directors: Sherzov Yusupov (chairman), Vagan Abragian, Philippe Delpal, Ivan Zyuzin, Michael John Calvey, Artem Konstandian, Dmitry Levin, Dmitry Piskulov, and Svetlana Trukhanovich.
Management Board: Alexey Kordichev (chairman), Konstantin Rogov, Elena Kalinina, and Alexander Nesterenko. Hide