Clean sweep on MDM Bank's board

by Simon Pirani

The owners of MDM, Russia’s second largest privately-owned bank, have triggered speculation about an early sale to a multinational buyer by installing a new team of directors.

Five new independent directors were elected on Tuesday, including a former head of HSBC’s international strategy. Only three members of the previous board remain: the bank’s joint owners Andrei Melnichenko and Sergei Popov, and chief executive Andrei Savalev.

A source at the bank said that Melnichenko will step down as chairman in the near future. Melnichenko, at 33 Russia’s youngest billionaire “oligarch”, with partners also controls the coal producer SUEK, the steel pipe maker TMK and the chemical company Evrokhim.

A Russian financier who recently left a senior post at MDM said: “Preparations for a sale have been going on for three years. I would bet on HSBC as the most likely buyer.”

Market rumour also pointed to HSBC, but it is not the only multinational bank eyeing the Russian retail market. Societe Generale, Raiffeisen and Citigroup have already made substantial investments.

Savelev told Emerging Markets yesterday that no immediate sale is planned. “The bank is not up for sale. This [election of new board members] is not an exercise aimed at a particular buyer. The owners aim to act not as hands-on managers but as investors – people who try to increase value, but don’t hold on to an asset for life.”

Asked when the bank might be sold, Savelev said that that was a matter for its owners. He pointed out that they had brought independent directors into all their companies in a drive to improve corporate governance and efficiency.

A spokesman for HSBC in London said that the bank would neither confirm nor deny market rumour on its intentions. Its Russian subsidiary, which passed to HSBC when it bought the Republic National Bank of New York in 1999, is active in corporate and institutional banking.

MDM did not make the results of Tuesday’s board meeting public until Kommersant newspaper reported them yesterday.

Sergei Donskoi, banking analyst at Troika Dialog investment house, said: “All the signs are that the owners are readying MDM for sale. The changes are good for corporate governance and make the bank a more attractive target.”

The new independent directors include George Cardona, who worked as a former general manager of HSBC and as head of group strategy for five years, and played a pivotal role in HSBC’s acquisition of Midland Bank in the UK.

The others are Aleksandr Bolshakov, a former partner at PwC; Richard Shis, who formerly worked at PwC; Andrew Seton, former head of audit at Polish Telecommunications and Andrei Vernikov.

The clean sweep on MDM Bank’s board follows a series of high-level management changes. Andrei Ilyin earlier this year moved from Nomura International to replace Svetlana Alekseeva as deputy ceo in charge of finance. It is understood that MDM’s international relations team will also report to Ilyin; its previous head, Alex Kocherguine, left last year and now works with SUEK.

Vladimir Izutin has moved from Alfa Bank to head up MDM’s retail business. His predecessor, Irina Bushev, resigned in April to take charge of the retail business being built by Vneshtorgbank after its acquisition of Guta Bank.

Yuri Kriukov, another deputy ceo, has also left MDM Bank. Both he and Alekseeva are starting their own businesses.