Russian Leading Managers
Financial Sectors: Pyotr Aven, Alfa-Bank
Year named president: 1994
Company employees: 6,000
12-month stock performance: Privately held
AVEN: “We’re trying to be the best bank in the country — the most transparent, efficient, conservative and client-oriented.”
ONE INVESTOR: “Aven and Alfa were right there with liquidity when it was needed. And they did a good job of communicating with the markets, both inside and outside Russia.”
Pyotr Aven, the bespectacled president of Alfa-Bank, is a good man in a crisis. When Russia’s 1998 ruble devaluation caused a banking panic, Alfa’s “automated teller machines were always full of cash,” recalls Richard Hainsworth, a banking analyst at Renaissance Capital in Moscow. “Many farmers and other depositors were able to hold on to their money. Alfa-Bank was seen by many as the hero of the Russian market.”
Most of Russia’s poorly reserved private banks didn’t survive, but Alfa, then a second-tier lender with just $951 million in assets, parlayed its enhanced reputation into major growth. It’s now the country’s biggest private lender, with $5.9 billion in assets, and its branch network is second only to Sberbank.
In July, Aven had to prove his mettle again. The government shut down midsize lender Sodbiznesbank in May after alleging that it was involved in money laundering, thus precipitating a crisis. Panicked customers withdrew so much money from privately held Guta Bank that the government had to arrange for its sale. Rumors then swirled around Alfa, and depositors queued up at its branches to withdraw $200 million, or approximately 13 percent of its nearly $1.5 billion deposit base, over three days. Aven and other wealthy shareholders injected $800 million into the bank, kept branches open until 9 p.m., quadrupled the amount of money in ATMs and offered to close out accounts for depositors demanding all their money. Aven’s leadership averted another potential disaster.
To succeed as a banking executive in a country famous for capital flight and meager public trust in institutions, Aven explains, “you need common sense, you have to be prepared to take big risks, and you have to be a workaholic.”
An economist with a Ph.D. from Moscow State University, Aven joined the fledgling Alfa-Bank in 1994 after serving for two years as the Russian Federation’s foreign economic-relations minister and later as a research scholar at the International Institute for Applied Systems Analysis in Austria. “He’s an experienced professional and a well-known economist with a very clean track record,” says Dmitry Vinogradov, an analyst at Brunswick UBS in Moscow.
Although his bank is privately held, Aven has striven to improve Alfa’s transparency, to inspire confidence among its customers and commercial counterparties around the world. Alfa’s accounts are audited by PricewaterhouseCoopers, and the bank discloses shareholder ownership to the Central Bank (but not to the general public), conforms to International Accounting Standards and advocates for deposit insurance (a modest form of which took effect countrywide in August). Aven has cut Alfa-Bank’s dependence on other affiliates of Alfa Group, one of Russia’s biggest private financial and industrial con-sortia, which is controlled by oligarch Mikhail Fridman and has stakes in everything from oil and gas to telecommunications to retailing. Over the past two years, Alfa-Bank has pared its loan exposure to these sister companies to 2 percent from 17 percent, reports Aven.
Still, Aven has a ways to go, says an investor who owns shares in some of Alfa Group’s public holdings. “You can’t tell where the industrial interests end and the bank begins,” says the shareholder.
Aven has already built a diversified Russian financial services business offering corporate loans, brokerage, asset management and insurance operations. Last year, Aven launched Alfa Bank Express, a high-technology retail banking operation that provides credit cards, consumer loans, 24-hour-a-day access to cash and Internet-based services. Aven says he plans to double the number of these branches to 50 within two years. “Ninety percent of the Russian population has never borrowed from any bank,” he explains. “The culture is changing — but not fast enough.”
The retail expansion is intended to rekindle Alfa’s strong earnings growth. After a 22 percent rise in 2002 profits, the bank reported a solid but smaller gain of 4.2 percent in 2003, to $109 million. Alfa has been so successful that analysts wonder whether it will go public or hatch an alliance with a big foreign bank. Aven insists, however, “We just want to stay independent.”