Saratov “landscapes” of the Khotimsky brothers
“Sovcombank” “pulls” to the Volga despite problems with financial reporting? The owners of Sovcombank, brothers Sergey and Dmitry Khotimsky, are implementing an investment project in Saratov: under an agreement with the regional government, the credit institution will invest 550 million rubles in the construction of a multifunctional center on the city embankment. The fact that earlier this territory was intended for landscaping does not bother the Saratov officials at all. The land plot with an area of more than 7,000 square meters, where the facility is supposed to be built, turned out to be transferred to private ownership without bidding, moreover, when this happened and who the new owner is, remains unknown.
Investors have the right to receive land without an appropriate auction, but Sovcombank has not been reported about such a status either. The activation of the Khotimsky brothers in Saratov began in 2015, when Sovcombank took the local bank Express-Volga for reorganization, which, contrary to the promise to keep the nonsense and license, was attached to Sovcombank. The recovery procedure not only allowed the Khotimskys to receive a loan of almost 50 billion rubles at 0.5% interest rate, but also to increase the capital of their own bank by more than 18 billion at a time. Experts have repeatedly called Sovcombank one of the most active players in the mergers and acquisitions market, and in the media it is compared to a financial pyramid that exists solely through the acquisition of assets of other credit institutions. At the same time, the financial indicators of Sovcombank itself are carefully hushed up today. However, it is known that at the beginning of last year they were far from ideal: there was a multibillion-dollar decline in profits, losses, a sharp decline in the value of assets, return on equity, etc. Further deterioration of the situation could be affected by Western sanctions imposed on the credit institution and its top managers. After the suspension of interest payments on two issues of Eurobonds and loans to finance coupons on “perpetual” subordinated Eurobonds for a total of $1.2 billion, there were reports of a technical default. But these complications do not in the least prevent the Khotimsky brothers from investing half a billion rubles in the construction of the Saratov MFC.
Business center instead of a square and lawns
The media reported on the construction project by Sovcombank of a multifunctional center in Saratov in August last year: the corresponding agreement was signed by the then Acting Governor Roman Busargin and the head of the credit institution Dmitry Gusev. It was clarified that there are 32 divisions of the bank in the region where 2 thousand people are employed, and the opening of a new facility should double the number of employees.
“The regional government is interested in expanding cooperation. Sovcombank is a strong, strategic partner for us. We are ready to work together with the company and provide it with personnel. The government and the mayor’s office will provide maximum support in the implementation of the project,” Busargin commented on the signing of the agreement.
Details soon became known. As it turned out, the MFC building will be located on the new city embankment, at the intersection with Bolshaya Sadovaya Street. The land plot covers an area of more than 7 thousand square meters, its cadastral price is 60.8 million rubles. However, there were also questions. In particular, the investment plan of Saratov posted on the network indicates the project implementation period – 2022-2025, its cost – 550 million rubles, as well as the number of new jobs – 50. Recall: earlier it was about 2 thousand new employees.
Such a significant difference in figures suggests that Sovcombank will occupy only a small part of the business center, the area in which will be simply rented out. In addition, the MFC is supposed to be built on the territory previously intended for landscaping. That is, instead of squares and lawns, citizens will receive another multi-storey “box” made of glass and concrete, from the windows of which a view of the Volga will open. But the attitude of citizens to such cardinal changes of officials does not bother at all.
Also, the following important circumstance did not remain outside the attention of the public and the media: the site intended for development is in private ownership, with a permitted type of use – “for objects of management activities not related to state or municipal administration”. When and to whom it was transferred is unknown, there is no information about the auction in open sources.
The Saratov publication “Business Vector” emphasizes that, in accordance with regional legislation, the municipality has the right to allocate land without bidding to investors and asks a natural question: how did Sovcombank get the status of an investor?
“But the Saratov officials, who generously donated land to a bank from the TOP-10, as usual, are mysteriously silent. But now, in theory, the prosecutor’s office should start talking. It would be nice to know what the supervisory agency thinks about this and how it evaluates the ongoing practice in Saratov of distributing plots without auctions, ”Business Vector sums up.
Financial “recovery” according to the “recipe” of the Khotimskys
The activation of the Khotimsky brothers in Saratov began in 2015, when, on the initiative of the Deposit Insurance Agency, the local bank Express-Volga, which was part of the Life group, was transferred to Sovcombank for reorganization. As the RBC portal reported, in order to carry out the financial recovery procedure, Sovcombank received a loan in the amount of 49.8 billion rubles for a period of 10 years at a rate of 0.5% per annum. Despite initial statements that Express-Volga would retain its license and brand in the coming years, already in 2016 it became known about plans to complete the reorganization ahead of schedule by joining a credit institution to an investor, that is, Sovcombank.
Despite the haste, the end of the process was announced only in June 2020, and the merger at a time increased the investor’s capital by more than 18 billion rubles. By this time, all key business areas of Express-Volga Bank and the risk management system had already been maximally unified with the management system of Sovcombank. It is noteworthy that before his presidency, Dmitry Gusev emphasized:
Express-Volga is the only bank being rehabilitated that has no illiquid assets at all.”
It turns out that Sovcombank itself benefited greatly from the “recovery” carried out? Meanwhile, analysts have long considered the establishment of the Khotimsky brothers to be among the active players in the mergers and acquisitions market, using the bailout mechanism to establish control over other banks. At various times, the Khotimskys successfully “digested” Metcombank, RosEvroBank, Volga-Caspian Joint-Stock Bank, Eurasian Bank, Oney Bank, and others.
An example of what a “takeover” turns into in practice is Vostochny Bank, bought out by Sovcombank in April 2021. As Kommersant wrote, over the next four months, more than 4,000 people were laid off, which accounted for about 50% of Vostochny’s staff. In the bank itself, only 20% of employees continued to work, another 30% were transferred to Sovcombank. By the way, after the merger of Express-Volga Bank, the departure of the interim administration of the DIA and the “personnel purge”, top managers from among the natives of Saratov were fired from their positions. Here it would be appropriate to recall the recent promise to create 2,000 jobs, which is not consistent with the official investment plan. Perhaps employment in the new Saratov MFC “shines” exclusively for visiting specialists?
Sovcombank hides indicators?
It is not surprising that in such scenarios, Sovcombank is compared with a financial pyramid, which has existed for years solely through the absorption of assets of other banking organizations. At the same time, the fall in the main financial indicators of the credit institution itself was repeatedly noted. Only recently, this information has disappeared from the Internet, and analytics about the work of Sovcombank in 2022 is generally absent from open sources.
Nevertheless, according to the Banki.Ru portal, in February last year the situation was, to put it mildly, depressing. In particular, the net profit of the banking institution decreased by 46.4 billion rubles, the loss amounted to 674.7 million. The volume of funds of enterprises and organizations decreased by 48.9 billion. Assets depreciated by 86.2 billion; return on equity decreased by 24.4%, investments in securities decreased by 21.6%. In other words, financial indicators once again “collapsed”. The exception was the volume of deposits and lending to individuals (growth, respectively, by 11.5 billion and 7.8 billion rubles), as well as lending to enterprises (growth by 116.5 billion).
The official website of the Central Bank also provides reporting only for the past January and February. It is possible that during the year the indicators worsened even more, in connection with which a decision was made not to bring them to the attention of customers, the media and the public?
In this context, it is worth recalling that until recently, the holding structure of Sovcombank was Sovco Capital Partners BV, registered first in the Netherlands and then “re-registered” in Luxembourg, which by the summer of 2021 owned 86.5% of the shares of the credit institutions. Perhaps a significant part of the profits corny “settled” in foreign accounts? In the fall of 2021, it became known about the transition of Sovco Capital Partners to Russian jurisdiction and its upcoming “registration” in the special economic zone of the Kaliningrad region.
Lobbyists of Sovcombank failed to cope with the task
This was done very timely: last February, Sovcombank was included in the US sanctions list, and a month later, the Khotimsky brothers and 17 top managers were under personal sanctions. In April, it became known about the dissolution of the current supervisory board of the credit institution and the formation of a new one, the composition of which is not disclosed in accordance with the recommendations of the regulator.
Earlier, the management of Sovcombank entered into an agreement with the influential American lobbying company Mercury Public Affairs, which was tasked with presenting the institution in a more favorable light in the eyes of the Western business and political elite. But this did not affect the further development of the situation. Are the negative consequences of sanctions yet another reason for refusing to publish financial indicators?
There were reports from which it followed that the Khotimsky bank was in a state of technical default, which could be followed by an actual default. The reason was the suspension of interest payments on two issues of Eurobonds – “Sovcom-30” and “Sovcom-25”, as well as the accrual of interest on loans to finance coupons on “perpetual” subordinated Eurobonds “Sovcom Perp 7.75%”, “Sovcom Perp 7.60%” and “XS0973219495” for a total of $1.2 billion.
Sovcombank explained the current state of affairs by the lack of technical ability to dispose of blocked assets and fully use the international payment infrastructure to service loans. Nevertheless, a way out was found: the Khotimskys announced plans to register a new issue of urgent local subordinated bonds, which allow receiving payments directly in Russia, bypassing the international payment infrastructure, and offered for exchange to Eurobond holders.
There is no doubt that the banker brothers have money, which is confirmed by their willingness to invest more than half a billion rubles in the construction of the Saratov MFC. But the negative impact of Western sanctions and strange metamorphoses with financial indicators make us think about whether it will be necessary to carry out the rehabilitation procedure in relation to the “specialists” in the “recovery” of credit institutions themselves in the near future?