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. Last Updated: 07/27/2016

Alfa Bank Owners in Spotlight

MTMikhail Fridman
The ownership structure of Alfa Bank, Russia's largest private bank and one of its most secretive, was revealed on Thursday in a memorandum leaked to two newspapers.

Mikhail Fridman and his business partners German Khan and Alexei Kuzmichyov control a majority 77 percent in the bank, said a memorandum accompanying the bank's issue of subordinated eurobonds.

The document presents the clearest breakdown of Alfa Bank's shareholder structure to date. Analysts, however, said it hid as much as it revealed, and rating agencies said it was unlikely they would move to upgrade the bank.

The three partners control a 77 percent stake in the Virgin Islands-registered ABH Holding, which holds 99.7 percent in Alfa Bank through the chain of 100 percent subsidiaries ABH Financial Limited and Moscow-based OAO AB Holding, the memorandum said, Kommersant and Vedomosti reported.

The memorandum did not reveal the distribution of shares among the three partners, saying only that in voting on Alfa Bank issues, Fridman, Khan and Kuzmichyov must act "as if they were one shareholder." It was also not clear who owned the remainder of the bank, which is Russia's fourth-largest in terms of assets.

Alfa Bank confirmed the reports on Thursday but declined to comment further.

"This does not tell us much more than we already knew," said Richard Hainsworth, head of Rusrating, an independent rating agency. "And where does Peter Aven come in? He used to talk as if he was a share owner."

Peter Aven, a longtime business partner of Fridman, is president of Alfa Bank.

"People knew who the beneficial owners were before, even if not the exact percentages," said Andrew Keeley, banking analyst with Renaissance Capital.

ABH Holding and, in turn, Alfa Bank, are part of Alfa Group, an overarching holding that among other assets also controls 25 percent of oil major TNK-BP, 29.9 percent of alternative telephony provider Golden Telecom, 24.5 percent of mobile operator VimpelCom and 25.1 percent in mobile operator MegaFon, Vedomosti reported.

Fridman, Khan and Kuzmichyov are also known to be shareholders in Alfa Group. Fridman told The Wall Street Journal in an interview this October that he held the biggest single stake in Alfa Group, over 40 percent, and named Khan as another main shareholder.

Kuzmichyov -- the chair of the board of Alfa Group's affiliated structure Alfa Echo -- was revealed as a third major shareholder in Alfa Group by a source within the company, Vedomosti reported.

The revelations come just a month after rating agency Standard & Poor's listed Alfa Bank 28th among the country's major banks in terms of transparency.

The bank was reportedly pressed by the Central Bank to improve transparency as part of the banking deposit insurance reform, with analysts saying this might have been the main reason for Alfa's greater honesty in the memorandum.

It is too early to talk of transparency at Alfa Bank, Hainsworth said. "It will only be transparent when the whole Alfa Group is understood. Transparency is about understanding how things interact and how things work [within the corporate structure]," he said.

"It's not the shareholder of the bank that's worrying, it's the amount of money that is kept offshore. Who knows where the actual cashbag is when things go wrong?" said another banking source who did business with Alfa.

"The enforceability of legal proceedings in more distant courts is questionable," the banker said.