From Russia with money

PROFILE: Vladimir Potanin. At just 36, the head of Uneximbank has created a financial empire. Mike Streeto reports

On A hot day last month, Russia's biggest capitalist and most influential banker, Vladimir Potanin, drew a crowd at Moscow's chic Balchug- Kempinski hotel with its stunning views of the Kremlin. Looking every inch the western investment banker, tall and elegant with piercing intelligent eyes, Potanin, who has overseen sales of some of Russia's largest state- owned companies, had a merger of his own to announce.

The International Corporation for Finance and Investment (ICFI), one of Russia's biggest financial groups credited with saving the hard currency holdings for the country after the break-up of the Soviet Union, will unite with the Renaissance Capital Group, one of the pioneers of the Russian securities market, by the end of the year. Potanin is the president of Uneximbank, ICFI's parent.

The link-up is the latest in a dazzling array of deals put together by Potanin this summer placing him at the heart of the his country's economic restructuring. As president of Uneximbank, the bank he founded in 1993 and one of Russia's largest in terms of assets, he is the leader of one of the most powerful financial and industrial groups, Unexim-MFK. This has 24 member companies in industries ranging from oil to metals to publishing. "He makes all the major business decisions," said Andrei Yashchenko, fixed income and banking analyst at United City Bank.

Potanin left Unexmimbank last summer to join the cabinet as economy minister but lost his job in March when President Boris Yeltsin fired his cabinet. His return to Uneximbank heralded an aggressive phase of expansion. In the last five months, Uneximbank and Potanin have been riding a wave of government sales of some of Russia's largest enterprises.

In July, Uneximbank led a group of investors including financier George Soros, Renaissance, Deutsche Morgan Grenfell, and ICFI in a successful $1.88bn (pounds 1.2bn) bid for a stake in RAO Svyazinvest, the telecommunications giant.

In August, Potanin's bank made a successful bid for a controlling stake in RAO Norilsk Nickel, the world's second largest producer of nickel. Uneximbank also holds a 15 per cent stake in the AO Novolipetsk Metallurgy Combine, Russia's largest steelmaker, and controls AO Sidanko, the country's fifth-largest oil producer.

This dynamic capitalist, who is still only 36, had his origins in the old Soviet power elites. He graduated from the Moscow State Institute for Foreign Relations, a school where many of the top communist party officials sent their children. He was trained as a diplomat and from 1983 to 1990 worked in the Ministry for Foreign Trade. These political connections, combined with his wit, enabled Potanin to build one of Russia's largest financial empires. His personal fortune is thought to be $700m.

Married with two children, Potanin spends his spare time playing football or skiing. He also likes chess, which suits a man with an agile mind. One of the secrets of his success is his ability to fit his strategy to the times. In 1993, he was one of several bankers to devise the "loans- for-shares" scheme to provide the government with cash. Under that scheme, Uneximbank and other banks lent the government money and received stakes in companies as collateral.

The government was supposed to repay the loans after about three years. If it did not, the steward-bankers were supposed to sell the shares to recover their principal and split any profits with the government. The trouble was that most of the stakes were sold at prices little higher than the minimum bids, and often to companies controlled by the banks who held the shares in custody. The programme aroused criticism that the state's prize assets were being sold for a song.

That is one reason why the government trumpeted its success in the sale of a 25 per cent plus one share in Svyazinvest, where Potanin's group bought the shares for $725m more than the starting price of $1.15bn. Uneximbank also paid about $110m more than the starting price for a 38 per cent stake of Norilsk Nickel - a tacit acknowledgement that the rules of the game had changed. Even so, the transfer of that stake promised to make Potanin's empire even more formidable, and other businessmen called foul.

Vladimir Gusinsky, whose own holdings included Most Bank and the Most Media group and NTV television, criticised the sale of Svyazinvest, saying the price was still too low. "We don't want to be dramatic, but there is no certainty that Russia has received the maximum profit from the Svyazinvest auction," said Vyacheslav Kostikov, a deputy of Gusinsky's.

The ICFI merger with Renaissance promises to forge a securities powerhouse. ICFI's fixed-income trading will be augmented by Renaissance's prowess in the stock market, which has climbed 186 per cent this year, making it the world's best market for investors. "We want to develop both these areas so the two groups can be leaders," said Potanin. The merger will create a securities firm with $2bn in assets, $400m in equity capital, and control over another $1bn in funds - the largest in Russia according to Potanin.

Potanin will chair the new bank's board and the chief exeuctive will be the American Boris Jordan, who founded Renaissance as a western-style investment firm to serve Russian markets. The combination of the western expertise of Renaissance with the political clout of ICFI is likely to prove a powerful combination.

Some analysts query the strategy and wonder if Potanin is not running the risk of expanding Uneximbank too fast. "It's going in every possible direction there is, trying to create a universal bank. The question is what they're trying to create out of it," said Andrei Arofikin, banking analyst at Credit Suisse First Boston in London.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions
Major medical journal Lancet under attack for 'extremist hate propaganda' over its coverage of the Israeli-Palestinian conflict

Lancet accused of 'anti-Israel hate propaganda' over coverage of Gaza conflict

Threat to free speech as publishers of renowned medical journal are accused of inciting hatred and violence
General Election 2015: Tories and Lib Dems throw their star names west to grab votes

All noisy on the Lib Dems' western front

The party has deployed its big guns in Cornwall to save its seats there. Simon Usborne heads to the heart of the battle
How Etsy became a crafty little earner: The online market has been floated for £1.2bn, but can craft and capitalism coexist?

How Etsy became a crafty little earner

The online market has been floated for £1.2bn, but can craft and capitalism coexist?
Guy Ritchie is the latest filmmaker to tackle King Arthur - one of our most versatile heroes

King Arthur is inspiring Guy Ritchie

Raluca Radulescu explains why his many permutations - from folk hero to chick-lit hunk - never cease to fascinate
Apple Watch: Will it live up to expectations for the man or woman on the street?

Apple Watch: Will it live up to expectations?

The Apple Watch has apparently sold millions even before its launch tomorrow
Don't fear the artichoke: it's a good cook's staple, with more choice than you'd think

Don't fear the artichoke

Artichokes are scary - they've got spikes and hairy bits, and British cooks tend to give them a wide berth. But they're an essential and delicious part of Italian cuisine
11 best men's socks

11 best men's socks

Make a statement with your accessories, starting from the bottom up
Paul Scholes column: Eden Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo

Paul Scholes column

Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo
Frank Warren: Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal

Frank Warren's Ringside

Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal
London Marathon 2015: Kenya's brothers in arms Wilson Kipsang and Dennis Kimetto ready to take on world

Kenya's brothers in arms take on world

Last year Wilson Kipsang had his marathon record taken off him by training partner and friend Dennis Kimetto. They talk about facing off in the London Marathon
Natalie Bennett interview: I've lost track of the last time I saw my Dad but it's not because I refuse to fly

Natalie Bennett interview: I've lost track of the last time I saw my Dad

Green leader prefers to stay clear of her 'painful' family memories but is more open about 'utterly unreasonable' personal attacks
Syria conflict: Khorasan return with a fresh influx of fighters awaiting the order to start 'shooting the birds'

Khorasan is back in Syria

America said these al-Qaeda militants were bombed out of the country last year - but Kim Sengupta hears a different story
General Election 2015: Is William Cash the man to woo Warwickshire North for Ukip?

On the campaign trail with Ukip

Is William Cash the man to woo Warwickshire North?
Four rival Robin Hood movies get Hollywood go-head - and Friar Tuck will become a superhero

Expect a rush on men's tights

Studios line up four Robin Hoods productions