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Russia: Uneximbank Merging With Renaissance Capital

  • Stephanie Baker

Moscow, 10 July 1997 (RFE/RL) - A powerful new player entered Russia's financial markets yesterday after former First Deputy Prime Minister Vladimir Potanin announced that his Uneximbank is teaming up with the brokerage house Renaissance Capital.

Potanin told a news conference that MFK Bank, a subsidiary of Uneximbank, and Renaissance would each own 50 percent of the new institution, to be called Renaissance-MFK. He said the merger would create Russia's largest investment bank with total combined assets of more than $2 billion.

Renaissance Capital founder, Boris Jordan, called the alliance a "milestone in the development of the Russian capital market." He said the union would allow Renaissance-MKF to compete with international investment banks and offer a "Russian" alternative to some of the major brokerages.

By joining forces, the two plan to marry talent from each institution and consolidate their holdings in some of Russia's biggest companies. Yesterday they announced plans to bid for a multi-million dollar tender to acquire a 25 percent stake in Russian telephone network Svyazinvest.

Potanin, who left government after a government reshuffle in March, brings with him political connections and a rich financial empire. His Uneximbank is ranked Russia's third largest bank by assets while Bank MFK is fifteenth. Uneximbank has been the focus of intense criticism because of its role in the controversial loans for shares privatization program, when it won stakes in some of Russia's prized companies at bargain-basement prices.

For his part, Jordan offers a dynamic group of market specialists and a fast growing network of Western clients. Jordan, an American whose parents are Russian, came to Moscow in 1992 to work for the investment house CS First Boston.

He quickly gained a reputation for being a savvy player in Russia's financial markets, helping CS First Boston make millions. In 1995, he decided to form his own investment bank, Renaissance Capital, which focused on Russia's equity markets.

The two men, both in their early 30s, are not strangers by any means. Potanin's MFK had helped Jordan get his start more than two years ago, putting up funds in exchange for a minority stake in Renaissance.

Now MFK has a 50 percent stake in the new company, leading many to speculate that Renaissance may have lost more than it gained. MFK, like many Russian banks, is suffering because profits from the government securities market have plunged since the start of the year. In contrast, Renaissance has profited from the equity market, which has grown more than 100 percent since January.

Some believe Potanin was looking to solidify a partnership with another firm in order to strengthen his position in battles to control some of Russia's most sought-after companies. Renaissance and MFK tried last month to win a seat on gas monopoly Gazprom's board of directors, but their joint candidate, Andrei Vavilov, former deputy Finance Minister, was voted down. Potanin said Vavilov would not take part in the new company, but would be in charge of Uneximbank's holding company, Interos.

The failed bid to secure a place for Vavilov on the board led many to speculate that Potanin's connections to the government, which now calls the shots at Gazprom, are waning. By joining forces, the two have better chances of exerting their influence.

The merger will also allow them to step up efforts to acquire new stakes and hold on to existing ones. Uneximbank, which controls a major chunk of Norilsk Nickel, a major international mining company, hopes to retain control over the stake it manages for the government in an auction planned for later this summer.