Experienced Investment Bankers
Director of Equity Financing, FINAM Investment Company, Moscow
Moscow's booming financial services industry can't find enough managers to meet demand
Russia's financial markets continue to see unprecedented growth and new opportunities. Recently PricewaterhouseCoopers estimated that within the next three years the volume of assets under private asset management worldwide will increase 30 to 50% annually. The National Association of Securities Market Participants (NAUFOR) reports that over the last six months the number of private investors in Russia increased from 350,000 to 500,000. This is the result of the recent "people's IPOs" -- the Sberbank (RTC:SBER) IPO attracted about 30,000 individual investors and 130,000 private investors subscribed to Vneshtorbank's (RTD:VTBR) intial offering. NAUFOR expects that by the end of 2007 there will be about 700,000 private investors in Russia. Other statistics support this prediction: in Q1 2007 Russian mutual funds attracted about 15.8 billion rubles ($ 600 million) -- a 50% increase over the first quarter of 2006.
These impressive statistics lead to an important question -- who is going to manage all of these new assets? I wrote earlier about "Russia's War for Talent", and the shortage of skilled financial managers in Russia seems to be getting worse every day. PWC reports in its study that only 26% of 43 polled investment banks believe that they will be able to fill all of their staff vacancies within the next three years.
Vneshtorbank's IPO attracted 130,000 private investors. VTB is now considering creating its own investment banking division
More and more 'blank spots' on the map of the Russian marketplace are filling up every day. When we visualize this map, we notice that practically all the major players in global finance are now on the ground in Russia: JPMorgan (NYSE:JPM), Merrill Lynch (NYSE:MER), Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), HSBC (NYSE:HBC), Raiffeisen International (WBAG:RIBH), Societe Generale (OTC:SCGLY), ICICI Bank (NYSE:IBN), Intesa (BIT:ISP), UniCredit (BIT:UC), Nomura (NYSE:NMR), and many others. Just this week Toyota (TYO:7203) announced that it has officially received a license to initiate banking operations in Russia. Meanwhile, here in Moscow we continue to await the arrival of Barclays PLC (NYSE:BCS) and Industrial & Commercial Bank of China (ICBC) (SHA:601398).
The share of foreign capital among the total capitalization of Russian banks is 18.3%. Since the beginning of the year this number has risen by another 2%; with 3-4% expected to be the increase by the end of 2007. This week the Russian business media reported that Vneshtorbank (RTD:VTBR) is seriously considering establishing its own investment banking division. This new venture would not be cheap -- experts believe that the bank will spend at least $ 100 million. This week Germany's Bayern LB Bank announced that it is opening an office in Moscow.
I have previously posted on Russia Blog about how for the first time in decades, European investment bankers are earning more from IPOs than their American counterparts, even as underwriting fees in Europe are often lower than can be found in the U.S. Russian investment banks have now started to profit from that trend, by luring some talent away from London and New York.
Russia's new business elite is growing fast and the lack of qualified experts to manage new IPOs and very large private client portfolios is evident. According to some Russian financial industry experts, experienced investment managers in Moscow are probably getting overpaid due to their scarcity -- in the last year, salaries have shot up 50%.
The "War for Talent" is now in full swing. Almost every bank has announced plans to boost their staff in Moscow. The latest battle reports come from Renaissance Group, which has brought two new executives on board: Richard Bruens, the former Executive Vice President and Head of Investor Relations at ABN Amro (NYSE:ABN), has joined Renaissance Capital as Head of Strategy, Communications and Investor Relations; Petri Kivinen, the global head of debt capital markets at Dresdner Kleinwort, has joined RenCap's emerging markets investment bank.
You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and are reproduced here solely for educational purposes. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.