Ru En

Putting a trade twist on an investment bank

Ruben Vardanyan Troika Dialog Manager

Date: 1 November 2009

Source: Global Trade Review

With Standard Bank’s stake in Troika Dialog formally approved in September, the Russian investment house is about to venture into new markets and product lines, including trade finance. Rebecca Spong met with Ruben Vardanyan, chairman and CEO of Troika Dialog, to find out more.

Ruben Vardanyan was just 22 years old when he became CEO of Troika Dialog in 1992 and began to build up an investment house from scratch. His aim was to create an informational company that would ensure Russia would become a key player in the globalized world. “Our vision is unique for several reasons,” Vardanyan explains. “First, our company has always taken a client orientated approach to its business. Second, we base our operations and customer service approach upon long term goals. Third, we always strive to uphold international standards in everything we do – both client operations and within the company. Finally, we have a strong, corporate culture that attracts premier talent from the market and ensures a high staff retention rate.”

Maintaining a long-term outlook with high international standards was never going to be an easy goal given the though get-rich-quick environment of the post-Soviet 1990s. However, the investment house has succeeded in establishing itself as Russia’s oldest and largest investment house. For the full year 2008, Troika Dialog had an average 45.7% share of the total amount of deals on the Russian stock exchange. Then the current credit crisis took hold of Russia’s economy, credit markets stalled and foreign investors began to pack their bags. The country’s stock market fell by more that 70% sending waves of panic through the banking sector and wider economy.

Rumors grew, before being vehemently squashed, that the state-owned bank Sberbank would buy out Troika.

The investment house also saw its main rival Renaissance Capital sell a 50% share stake to one of Russia’s richest men, Mikhail Prokhorov, in September 2008 for US$500mn.

Amid the chaos, an attractive option appeared to Troika in the shape of the South African bank, Standard Bank. In early 2009, negotiations between the investment house and the bank began, concluding in the decision made in March for Standard Bank to acquire a 33% stake in Troika in a US$200mn deal. This decision then obtained full regulatory approval on September 28, 2009. Under the terms of the alliance, Standard Bank has merged its Russian business into the investment bank. Troika's capital base has increased by US$300mn as a consequence of the transaction.

Both companies will now operate under the Troika Dialog brand, and ZAO Standard Bank’s team cleared their desks and moved into Troika’s offices at the end of September.

The terms of the partnership will see Vardanyan join the board of directors of Standard Bank, while Standard Bank’s Rob Leith and David Duffy will join Troika Dialog’s board. The two financial institutions previously had very different focuses. “We were a pure investment house before this deal with Standard,” explains Vardanyan. “The overlap with Standard Bank is very small, which makes this alliance a very good combination,” he adds. Troika Dialog will now be taking it first steps into the commercial banking world. In an official press statement, Vardanyan refers to the deal with Standard as a “watershed” for the bank, creating a “new kind of financial institution adapted to new global markets.”

Among other trends, one development in these new global markets, Vardanyan notes, is the definite shift of focus among Russian companies away from the struggling European markets, and toward the emerging markets in Brazil, Hong Kong and Singapore.

Just a few weeks after our meeting in Moscow in September, Vardanyan flew out to Singapore to attend Troika Dialog’s fourth annual Russia-Singapore business forum, an event that illustrated the importance Vardanyan places on the role of Asian markets in supporting Russian recovery.


The partnership with Standard is expected to further capitalize on these growing Russia-Asia links, as well as help increase Russian corporates’ presence in Standard Bank’s natural territory, Sub-Saharan Africa.

The Chinese bank, ICBS, is a major shareholder in Standard Bank, and with this is mind, Vardanyan hopes that under the alliance he will see more business flow between Russia, Africa and China. “We are the local champion in Russia, we can use the local champion in China, and Standard Bank is the local champion in Africa. There is a great opportunity to use this network to secure more business.”

Not only will Troika’s geographical focus change in the coming months, its product offering will inevitable evolve. These product developments will be overseen by Peter Ghavami, the new head of global markets at Troika. He was formerly the head of capital markets in Russia at Lehman Brothers, and hired by Standard Bank to control its investment in Troika.

“The partnership with Standard Bank is allowing us to significantly increase our product capabilities, both in investment banking and capital markets,” Ghavami tells GTR. He comments that trade finance is a good example, among many, of the new capabilities of the bank.

“Standard Bank has traditionally been very strong in trade finance, and the depth of the Troika franchise in Russia, together with the product and balance sheet capabilities of Standard Bank, will allow us to provide a deeper product suite to our core clients,” he explains. The focus of the new trade finance offering will naturally be on these developing cross-border flows between Russia, Africa and China. “Given Standard Bank’s strong historical presence across the African continent, we have a unique ability to provide trade finance to Russian clients desiring to access this market place and vice versa.

“Similarly, Standard Bank’s largest shareholder is ICBC, the largest bank in China and in the world. This naturally lends another dimension for our trade finance efforts – Russia – China,” he adds.


Troika has now adapted to new market conditions, expanding to the commercial banking area, and Vardanyan is now hopeful that broader nationwide economic recovery might lie on the horizon.

“Because the Russian economy is linked to the oil price, and the oil price per barrel is rising, recovery will happen,” he suggests.

In terms of the financial markets, he sees increasing activity in the debt financing markets, and anticipates recovery will move from the debt markets, into the convertibles markets before finally reviving the equity markets.

In the short term, he remains relatively pleased with the government intervention in the banking sector, “Not only are the results impressive but so too is the level of communication. The government spent a lot of time listening to the private sector, and the decisions made managed to increase the level of liquidity in the market.” However, he adds: “The banking sector problems are not over yet, there are a lot of bad and non-performing loans of banks’ balance sheets, which will only prolong the situation.” Talking about Russia’s long-term prospects, he remarks, “The next problem is to restart local markets and restart domestic demand for consumer services, and secondly there needs to be huge investment in infrastructure, modernization, capex and fixed assets, This is the main challenge for the next three to five years –infrastructure and capital investment.”


With other forms of financing scarce, the European Bank for Reconstruction and Development (EBRD) has played an important role in supporting Troika Dialog, Shortly after the strategic alliance between Troika Dialog and Standard Bank was announced earlier this year, the EBRD extended a US $150mn loan to the investment house.

The loan is senior ranking, unsecured, and carries a tenor of five years. The purpose of the facility is to diversify Troika’s sources of funding, providing the group with long-term and stable source of capital. In an official statement, Vardanyan commented: “The alliance with Standard Bank provides Troika with a strategic partner. The loan with EBRD provides Troika with a financial partner. With both we are very well placed strategically and financially to take Troika’s business forward in the coming years as an independent house.”

George Orlov, the EBRD’s director for financial institutions in Russia, added: “The development of Russian capital markets is a key driver for increasing financial intermediation and cementing financial stability in the country. Financing Troika Dialog, a major local market player and a good EBRD partner will contribute to the increase of activity and financial innovation in the market as well as strengthen market stability.”

Troika Dialog also displayed further evidence of financial strength in July when it announced it had repaid in full a syndicated loan taken out in July 2008, with ING and Standard Bank acting as bookrunners and HSBC acting as a mandated lead arranger.