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. Last Updated: 07/27/2016

Tariko Refuses to Deal With Mortgages

ReutersVodka billionaire Rustam Tariko, pictured in November, has said he will not pander to surging demand for mortgages.
Vodka-to-banking billionaire Rustam Tariko made a fortune by introducing Russians to consumer credit, helping millions to buy their first television, refrigerator or car.

But he won't pander to the latest aspiration of the emerging middle class -- a mortgage to buy a new home -- as long as Russians are gripped by what he calls a "crazy" property boom.

"I believe a crisis will come soon," said Tariko, founder of Russky Standart Bank, the country's top consumer lender. "Real estate prices are very inflated."

Tariko, a tanned 44-year-old with a shock of shoulder-length black hair, has turned a knack for marketing learned as a young tour operator and liquor salesman into a burgeoning financial and drinks empire.

His Russky Standart vodka is the country's leading premium brand, and he is taking on the North American market with Imperia, a top-shelf product that comes in a fancy bottle with Swarovski crystals decorating the cap.

He founded Russky Standart Bank in 1999, the year after financial markets crashed, and has never looked back. Forbes magazine last year estimated his fortune at $1.9 billion.

Russky Standart Bank boasts a return on equity of over 75 percent, controls 80 percent of Russia's credit card market and employs 40,000 people.

"One-third of Russians are our clients, we are getting 40,000 to 50,000 new customers a day," Tariko said last week.

Now, in a move to reduce the risk profile of his bank and cut its reliance on its $6 billion in junk-rated bonds, Tariko wants to build up a deposit base by getting people to open savings accounts.

The bank, which has until now distributed its loan products at kiosks and in electronics and home-improvement stores, built 150 branches last year and has plans for another 150 this year. "If we reach 500 branches in two years it will be sufficient to serve our depositors," he said.

Despite his ambitious growth plans, Tariko sees risks to Russia's eight-year economic boom, above all from the red-hot property market. But, Tariko says, too many speculators are buying. When he drives down affluent Kutuzovsky Prospekt, he sees that nobody is home in many newly built residential complexes.

"When I see the lights on in all these new buildings, I will start to invest [in mortgages]," he said. "But while the lights are out, I won't."

The ruble, which like the property market has risen on the tide of petrodollars, is another worry.

"Currency risk is important. A lot of people are saying that we could have an adjustment," Tariko said. "The Russian currency is becoming more expensive every day."

The ruble rose by 9 percent against the U.S. dollar in 2006, and its underlying appreciation has more than eroded the advantage won from the devaluation of 1998.

"We really need to optimize our costs, and Russians are not very strong on optimizing costs," Tariko said.

As a self-made businessman, Tariko seems more relaxed about political risk than other oligarchs, who scooped up state assets at knock-down prices in the 1990s and still depend on the favor of the Kremlin. Some have sold strategic stakes or floated their companies on the stock market to insure against the kind of attack that landed Mikhail Khodorkovsky in jail and forced others into exile.

But Tariko, who owns Russky Standart Bank outright and has no need to raise fresh capital, has rejected the advice of investment bankers to float off a minority stake.

"Maybe I'm naive, but I believe that the best protection you have against the government is to do your best work," he says. "The only nightmares I have in terms of my work is when my customer is unhappy. My best protection is my product."