OREANDA-NEWS. On April 04, 2008 Belorusy I Rynok (The Belarusians and the Market) daily, the country’s leading business newspaper, said that a decision to increase Belgazprombank’s equity was ‘moving up to the higher league’, reported the press-centre of Belgazprombank.

Here you can view the article by Vladimir Tarasov, the Belorusy I Rynok reporter, about this largest in the Belarusian banking system history foreign investment.

BELGAZPROMBANK MOVES UP TO THE HIGHER LEAGUE
In 2008-2009, Belgazprombank’s equity will be increased by \\$150 million at the cost of resources allotted by the bank’s Russian shareholders – Gazprom and Gazprombank, said Victor Babariko, Chairman of the Board of Belgazprombank, at the press-conference on March 21, following the Annual General Meeting. He emphasized that the decision to increase the equity was adopted jointly by the Belgazprombank management and the management of its Russian shareholders – Gazprom and Gazprombank.

The \\$150 million investment will consist of two tranches. The announced subscription to the first portion of shares worth \\$75 million will last till April 2008. The second subscription for shares, also worth \\$75 million, is to be finished in mid 2009. With these investments and the banking profit, the bank’s own capital is expected to reach \\$277 million by 2012. The bank’s assets will total \\$1,7-1,8 billion by the end of this period.

According to Mr. Babariko, these are the major parameters of the strategic program for the bank development that was adopted at the General Meeting on March 21. “We intend to become the number one commercial bank in Belarus,” Mr. Babariko stated.

At present, the Russian shareholders’ stake in Belgazprombank exceeds 85%. After the \\$75 million equity rise Gazprom and Gazprombank will hold a 48,1% stake in the bank each; and the Belarusian side will own a 3,8% stake. These investments will put Belgazprombank in the third position among the country's banks in terms of equity (for the time being).

At the same time, Mr. Babariko emphasized, the bank does not intend to take hold of other Belarusian banks’ share in the market. “Our top objective is to form a clientele the needs of which Belgazprombank will be able to meet. Therefore, we are intending to increase the number of our customers so that around 25% of Belarus’ small and medium-sized businesses – the core of our commercial segment – are serviced at Belgazprombank by 2012,” said Mr. Babariko. Belgazprombank will then hold 25% of the market. Presently, it holds around 10%.

Mr. Babariko said also that, foreseeing the growth rates, the bank is guided by the customer market evaluation. Banking is part of the economics paradigm, therefore Belarus’ economic development is crucial for the banking sector. The Chairman of the Board of Belgazprombank believes that the Belarusian economy is sending positive signals: all resolutions adopted by the government are aimed at providing private businesses with preferences, so this market is likely to grow with Belgazprombank’s share in it increasing.

Besides, one of the bank’s shareholders is Gazprombank - a powerful financial institution; so Belgazprombank has a sound support, Mr. Babariko said.

Gazprom consolidates flows
Andrey Kruglov, Chairman of the Board of Directors of Belgazprombank, Deputy Chairman of the Board of Belgazprombank, and Head of the Financial and Economic Department of Gazprom, voiced Gazprom’s position regarding the increase of Belgazprombank’s equity.

Gazprom is leading a consistent policy to become closer to end customers in order to keep its business transparent and efficient. “No doubt, we are looking to ensure that financial management principles used in Gazprom are observed in Belarus and other places where Gazprom is represented,” he stated.

“As far as an agreement was reached under which Gazprom will receive a stake in Beltransgaz to launch a joint venture, we hope that Gazprom’s settlement procedures and financial policy conducted in Belarus will meet our standards. Although we do not focus on the banking business, we decided to increase Belgazprombank’s equity and expand Gazprom’s and Gazprombank’s control over this Belarusian bank to ensure financial monitoring and consolidate financing flows, that are generated in Belarus, in a single financial institution," Mr. Kruglov said.

He believes that the decision to invest in Belgazprombank is not only accompanying of the Gazprom-led financial policy, but also a significant investment in creation of a financial infrastructure in Belarus, as the scope of Belgazprombank’s activities includes, along with the energy sphere, funding of small and medium-sized businesses, personal banking services, etc.

Investments in the booming market
Yuri Kats, member of the Board of Directors of Belgazprombank, Vice President and Head of the Regional Business Department at Gazprombank, also pointed to this specificity of the investments planned.

He stated that Belarus is showing a rapid development and can be seen as a promising market. “Belgazprombank intends to excel in the commercial bank sector, and I hope it will further advance. Therefore, along with corporate interests, we were guided by profitability of the banking business in the country. We are pleased with Belgazprombank’s performance, the wide array of financial products offered, and excellent engineering carried out by Belgazprombank – our first affiliated bank,” Mr. Kats stated.

He also said that, in the course of discussing the equity increase, some questions arose. They primarily regard the bank’s capital surge which should be accompanied by the same growth in its business. A time lag is needed for the business to develop in line with the bank’s capitalization growth and ensure the required capital efficiency. In this connection, the process of increasing Belgazprombank capitalization was divided into two phases which will take two years.

Mr. Kats said that Gazprombank want to have in Belarus a reliable structure that would effectively use the funds that Gazprombank allocates to the country. So far, the bank successfully copes with this task, he emphasized. From 2004 to 2007, Gazprombank allocated \\$22.5 million for lending to small and medium-sized businesses, and issued syndicated bank facilities and subordinated loans worth \\$44 million. On March 20, 2008 the bank decided to issue a \\$10 million five-year loan for small and medium-sized business development. Belgazprombank is successfully mastering Gazprombank’s strategy. Moreover, according to Mr. Kats, the Russian bank can learn some things in the field of engineering from its Belarusian counterpart.

“All this enables us to solve the tasks posed by one of our major shareholders, Gazprom: ensure financing and transparency of financing flows related to the gas industry and, also, ensure the development and successful diversification of Belgazprombank from which Gazprom will benefit because such diversification is likely to reduce the risks. Therefore, we decided to increase the equity and are intending to support Belgazprombank," Mr. Kats said.

Customers’ needs spotlighted
The equity rise will enable Belgazprombank to address the customers’ particular financial needs - attracting the required resources for that.

Mr. Babariko said that, with an authorized stock of around \\$30 million late in 2007, Belgazprombank attracted around \\$215 million as external loans. “We are pleased to say that late in 2007, on the peak of the financial crisis, we completed syndication with a repeat subscription at the price that was a fraction higher compared to our pre-crisis syndication. This showed that investors and the international financial market highly assessed our shareholders as backers of our stability as well as the bank's performance,” Mr. Babariko said.

He believes however that, with the planned increase of the equity, the ratio between the capital and external inflows will not remain unchanging. The Chairman of the Board of Belgazprombank emphasized, that it will be determined by the market needs. According to Mr. Babariko, the amount of own capital to be formed after the subscription to a new issue of shares will definitely meet all needs of the bank’s customers.

“Within the latest two to three years, the bank never ceased conducting active operations, and I believe that we can attract as much resources as required to fully cover the needs of all customers – small and mid-sized businesses and, partially, our major Belarusian shareholder, Beltransgaz. I believe that with this capital we will be strongly involved in the Beltransgaz funding program,” Mr. Babariko stated.

Presently, Belgazprombank is looking to obtain new sources of funding. In particular, foreign funding for mortgage is being negotiated. The resources to be attracted through this opportunity are estimated at \\$15 to 20 million, the repayment term will be ten or more years.

At the same time, as Mr. Babariko said, Belgazprombank does not want redundant financing which would be cost ineffective. He said that the initial plans for the \\$150 million equity rise have run into reasonable criticism connected with a decline in the bank’s efficiency. To avoid this, a decision was adopted to increase the bank’s own capital gradually.

“As far as I remember, the country’s banking system hasn’t had such investments before. And I think no one has ever made such big investments in the Belarusian economy either. This is great that we have such shareholders and that there is truly integrative cooperation between Russia and Belarus, which is highly important to us,” said Mr. Babariko.