The situation around VTB and the Bank of Moscow is becoming more and more complicated every day, following VTB’s acquisition of a major shareholding in the Bank at the end of February. The State bank’s actions and statements have become increasingly contradictory. The position may seem impenetrable from a commercial point of view, but that reflects the fact that the principle motivation behind the change of control of Bank of Moscow was political.
This view is reflected in the latest media coverage which reports that analysts from international banks are finding it increasingly difficult to provide a meaningful analysis of Bank of Moscow because the deal with VTB has taken it into “a misty area of Russian politics”.
What we all know about the Bank of Moscow
Bank of Moscow started from very small beginnings. It began in March 1995 when the Moscow City Government established a join stock company known as “Moscow Municipal Bank – Bank of Moscow” in which the City held a 51% stake and which only employed 6 people. Over the next 16 years, thanks to strong management under the Presidency of Andrei Borodin and a clear commercial vision, Bank of Moscow was built into a major financial institution and a major universal commercial bank in Russia, offering its clients the full range of banking products, and employing in the region of 9000 people.
Between 1996 and 2003, Bank of Moscow rose from 47th to 8th place in the list of top-equity Russian banks. Under Borodin’s leadership, Bank of Moscow was, from 2007, one of only a handful of banks in the country with an investment grade rating, such that in August 2006, J. P. Morgan International Finance Limited, part of JPMorganChase, became a minority shareholder in the Bank of Moscow, and in 2010, Goldman Sachs and Credit Suisse Group AG similarly acquired 3.88 percent and 2.77 percent stakes respectively.