How can Russia's small and underfunded equity brokers break into the more lucrative areas of investment banking? By joining forces with foreign institutions, according to the conventional wisdom. But one local broker may have found a different way to turn itself into a major player. In mid-August, details emerged of a deal that brings together Russia's largest securities broker, Troika-Dialog, and the city of Moscow, likely to be one of the country's major sources of financing business over the next few years. The Bank of Moscow, in which the city of Moscow holds a majority stake, will form a strategic alliance with Troika-Dialog. After completion of a share purchase for an undisclosed sum, Bank of Moscow will own 20% of Troika and Andrei Borodine, the Bank of Moscow president, will have a seat on its board of directors.
The alliance is the latest in a series of deals that have shaken up the Russian brokerage sector this summer. In July it was announced that the International Company for Finance and Investment would merge with Renaissance Capital Group to form MFK-Renaissance. This may emerge as the only other Russian firm that can compete with foreign investment banks without outside help, thanks to the deep pockets and powerful political connections of its major backer Uneximbank.