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. Last Updated: 07/27/2016

MDM Bank Plans 100 Mini-Banks




Riding on an influx of clients that started in the wake of last year's banking crisis, Moscow Business World Bank is moving to stage a comeback on the retail market with plans to open 100 outlets in Moscow over the course of 2000.


"We intend to compete with the largest retail banks," said Alexei Kiselyov, an spokesman for Moscow Business World Bank, or MDM Bank.


The bank intends to open up a series of cheap "mini-bank" operating units f easily assembled for a cost of $30,000 and capable of rapid relocation to a more favorable site should business activity turn out to be too low.


"Each mini-bank can bring up to $100,000 to $150,000 in net profits per year, so the payback period is less than five months," said Julian Krasnopolsky, deputy chairman of the bank.


Each mini-bank will offer 10 services typically demanded by retail clients, including monthly utilities payments, currency exchange and money transfers abroad, he said.


"This is going to be a sort of McDonald's in the banking industry," Kiselyov said.


Moscow Business World hopes to regain a share in the retail market, which it wielded several years ago selling a network of exchange points. Bank officials refused to provide sales details, but admitted that it was a profitable transaction.


Bank officials say the nomination of powerful businessman Alexander Mamut as head of the bank's supervisory board this summer was part of the reason for MDM's recent successes.


Mamut f a 39-year-old lawyer turned banker who is also connected to another rising banking star, Sobinbank f was recently accused by Fatherland-All Russia of offering some of the party's candidates $800,000 or more each if they would withdraw their candidacy ahead of the State Duma elections.


The formerly low-profile businessman, described by the Kremlin as a voluntary, part-time aide to the president, has denied the accusations.


It is not known with precision just who MDM Bank's shareholders are. However, in a report issued last month, international rating agency Fitch IBCA stated that the "ultimate ownership and control of the bank are in the hands of its senior management, although formally it is split between a few companies."


The mini-bank plan is part of a wider, strategic plan currently under development, bank officials said.


When many other banks folded last autumn, MDM Bank suddenly found its client base expanding far more rapidly than it could have dreamed.


As a result, the bank has so far been growing on an ad hoc basis f responding to the unexpected boom. Now, it is busy mapping out a strategy to span the two-year period through to the end of 2001.


"Strategic planning lost significance and we entered a phase of quickly reacting to changes in market conditions," Andrei Melnichenko, MDM Bank's president, said this week. "It all depended on what kind of clients were knocking on our doors [after the crisis]."


Moscow Business World pumped up its assets to 20.6 billion rubles ($776 million) and increased equity to 4.43 billion rubles ($167 million) as of Dec. 1 this year, according to Russian Accounting Standards. Those figures represent impressive 220 percent and 370 percent increases respectively since Jan. 1, 1999.


By attracting new clients, the bank has been able to diversify to an extent its loan portfolio, which was earlier concentrated almost exclusively on metals.


In addition to adding metals firms Sibirsky Aluminum, steelmaker Severstal and copper holding Uralsky to its loan books, MDM has picked up coal mining concern Kuzbassrazrezugol, Gazprom trading subsidiary Itera, oil giants LUKoil and Sibneft, Northern Shipyard and the State Customs Committee.


While Sberbank and Rosbank remain the major banks for the Customs f with about 30 percent each of the organization's accounts f MDM processes some 8 percent of all Customs payments.


And it also claims that 80 percent of all Moscow car dealers are among its clients.


Fitch IBCA also noted that "as a trade-oriented bank in the past, MDM, did, on occasion, display a high-risk attitude," but customer lending as proportion of the bank's total assets continued to grow even though loan concentration remained high, a typical feature of Russian banking.


Last year non-interest income was the major source of the bank's earnings and share of interest income declined to 15 percent even though loans made up for 54 percent of the balance sheet footings.


Earlier, former chairman of the Central Bank Sergei Dubinin said in an interview with The Moscow Times that Moscow Business World was one of the rare banks that reduced exposure on forward contracts, following advice of the Central Bank.