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. Last Updated: 07/27/2016

Troika Clients Earn Big on Ruble Fall

VedomostiCustomers were offered guaranteed returns of 27 percent to 39 percent for placing money with BNP Paribas.

As the ruble plummeted last fall, Troika Dialog’s clients received an offer that was hard to refuse — an interest rate of up to 39 percent for letting the investment bank place their cash with French lender BNP Paribas.  

Customers were offered guaranteed returns of 27 percent to 39 percent for placing their money with BNP Paribas for a three- to six-month period, a client of the investment bank told Vedomosti.

The transaction — on which Troika earned a 0.5 percent commission — was performed through a trust management agreement, the client said.

In November, when the ruble began its steep downward spiral, Troika customers were given a choice between converting their ruble holdings into dollars or euros and profiting from the disparity in value, or to keep their holdings in rubles and receive a very high interest rate.

“The investment involved was not very large. We’re not talking about millions of dollars here,” the Troika client said. Nevertheless, the client said that he “didn’t make out badly” on the deal.

Troika’s management confirmed that clients received the offer.

“In the fall of 2008, during a period when the ruble was weak, the market saw significant discrepancies between the rates for bank deposits and prices for forward contracts and dollar-ruble swaps,” said Troika director Pavel Teplukhin.

Foreign banks took advantage of the discrepancies to attract rubles, Teplukhin said.

One of the banks that did so was the London branch of BNP Paribas, a long-time Troika partner. Clients depositing their rubles through Troika at BNP Paribas received interest rates of 29.5 percent to 39 percent for a three-month term and 27 percent to 29.5 percent for six months, Teplukhin said.

The situation lasted for two to three months, and clients who took advantage of it earned a considerable profit. But many clients, fearing a devaluation of the ruble, chose to convert their funds into foreign currency, Teplukhin said.

BNP Paribas was not available to comment.

Bankers were impressed by the deal, although they said it was one of several ways to make money during a volatile period.

“It was a very competent move, though I wasn’t aware of any such offers at the time,” said Vasily Zablotsky, a consultant to the chairman of the board of Otkritie. Clients received money for the risk of staying in rubles and not converting to foreign currency, he said.

But there were other ways to profit in November — buying dollars on Nov. 1 would have yielded just over 30 percent, while purchasers of euros on the same day would have earned almost 33 percent.

Not all banking industry players thought the offer was a favorable one to Troika’s clients, however.

The customer lost on this deal, said the treasurer of one Russian bank. Interest on ruble deposits skyrocketed to as high as 75 percent annually among foreign lenders because they could not get enough rubles — which they needed for funding clients and making bets against the ruble — at low rates from the Central Bank, he said.  

Troika could place clients’ cash at a foreign bank, give the customer 30 percent of the interest and earn itself a 40 percent profit, he said.