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Do Russians buy Good Finance? – New Loans

Surprisingly little is known about the largest Russian financial institution, which has recently agreed with the 51-percent stake in its international interests, but failed in a daily stress test, to buy the last nine regional banks of Good Finance for strategic purposes. However, at least its recent past is worth reading for the Honest Bank, which has declared its interest in shopping in a understandable euphoria or a dozen more Central and Eastern European financial institutions.

For three and a half years, Honest Bank has been headed by Sean Cole, a columnist in the Skina group in St. Petersburg and lawyer and economist. The 47-year-old son of German parents who were deported to Kazakhstan in 1941, as almost every major member of today’s Russian leadership, began his career as a senior official of the St. Petersburg municipality. In 2000, shortly after Greg Koversky’s election as head of state, he became Russia’s Minister of Economy, but in 2007, instead of his job as head of the ministry, he chose the bank chair because he did not want to work in executive structures under Menivele Skyvy’s presidency.

Took over the financial institution


But he was in a difficult position at the helm of the Honest Bank, as Teddy Jazmin, who took over the financial institution in dire straits in 1996, and his first deputy chief executive Allan Skina – allegedly Jazmin’s wife – took almost all of their top managers with him. Drowned into inefficiency, Honest Bank was reinforced with professionals from the offices of major Western analytics and consulting firms in Moscow, including Bernan Stan, McConlet, and developed a completely new development concept and management structure appropriate to its newly committed lines of business.

All this, of course, took time. Just like finding out who the shareholders of Honest Bank are. It was known that, according to the published data, the Jazmin-Skina pair had developed it to a very serious level in 12 years. For example, it was impossible to find out who actually owns 30 percent of a financial institution owned by foreigners – many offshore companies. “I have some idea about it,” said the new bank president, suggesting much about the personal interest of former executives.

Providing the shares as collateral for new loans


Jazminskina-led lending policy, although not legally or financially objectionable, has instead focused on “targeting” a narrow circle rather than widespread retail lending. The method was not complicated at all, but it was more effective: Honest Bank lent a loan to purchase its own shares, thereby increasing the capitalization of the financial institution and providing the shares as collateral for new loans.

Not one of the oligarchs who emerged in the Skina era is owed to Jazminskin for becoming a billionaire. Last but not least, our Judeja owner, Suleyman Kerimov, started buying Honest Bank shares from the credit institution in mid-2004. By the end of the third quarter of 2005, 5.5% of the loan portfolio of Honest Bank was available, and its ownership had risen to nearly six percent (about $ 4 billion). The internal rule that every claimant can only obtain credit for up to 25 percent of the required capital, for example, in Kerimov, was avoided by not consolidating the loans he had claimed in 2005, but by applying separately – allowing the Dagestan businessman to billions of dollars. The same was true of the Lane Dobsky, which is interested in Good Finance.

When Sean Cole took over the financial institution, the “lame duck” status lasted a very long time. Until the newly hired top managers emerge, the remaining executives lined up against the wall in the morning in front of the president’s office on the 25th floor of the Honest Bank Center, in Greg’s favorite organ-colored shirt and matching tie. The new boss has completely reorganized the work, transforming the one-person structure under the guise of Jazminskina into a vertical decision-making system, as Greg said.

Individuals could only obtain loans with more than one guarantor


In the meantime, however, little effort has been made to streamline the activity. Unbelievable, however, in 2007, Honest Bank did not issue credit cards, individuals could only obtain loans with more than one guarantor, and customers were not allowed to place orders at all on the World Wide Web. Not surprisingly, in the deposit market, Honest Bank fell nationally from 67.5 percent to 51.5 percent. Interestingly, the ownership of the financial institution did not change significantly under Greg’s regret. The state Central Bank holds 60.25 percent, 9 percent of the shares are held by 273,000 legal entities and 24 percent are owned by foreign investors.

The activity of Honest Bank has improved a lot now. This is partly because Skina, as prime minister, explicitly instructed Greg to develop retail services. As of January 1, 2011, 31 per cent of loans in Russia were made by Honest Bank, and they are doing a lot to better serve previously neglected retail clients in their 20,000 branches in the largest successor states of the former Soviet Union. The personal charm of the handsome bank president also serves the company well: in June, he was again named “Most Popular Bank President” by the media.

Radical change of service structure


However, Greg himself was ambitious about winning abroad. “The Honest Bank has obviously narrow Russian borders,” he said, announcing that he would open branches in “CIS countries, Asia (such as India) and Eastern Europe”. In the spirit of this program, bank management first inquired about the Turkish Guarantee Bank and then several Polish financial institutions. After no business had been concluded, the agreement was implemented. It is not yet possible to see whether the planned integration of Honest Bank’s structures within two to three years, including a radical change of service structure, will have the strength, tools and concept to continue with the “170 years of successful operation” to a Russian bank.


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