Emerging Europe

Despite conflicting views on the state of the economy and uncertainty caused by political unrest, banks are riding high on mortgage lending and consumer loans. There is still huge untapped potential for credit cards. High interest rates remain the fly in the ointment, however. Julian Marshall reports.

Slovakia’s now near-certain entry into the eurozone in January 2009 should help bolster the country’s credit ratings and improve investor sentiment towards the country, say bankers.

Having been hit by a series of defections in recent months, Deutsche Bank has acquired a new head for its Russian business.

Miles Millard, European head of debt capital markets, Deutsche Bank

Blackstone Group has hired Kemal Kaya as a senior adviser for its Turkish operations.

The credit crunch has brought the benefits of a strong, experienced debt house into stark perspective, and there has been a realization that not all investment banks and their services are equal. Jethro Wookey reports.

It is now very difficult to purchase market share via this method. How important is a firm’s market share to winning business now compared to a year ago?

Osman Semerci, Merrill Lynch’s former global head of fixed income, currencies and commodities, and co-president of the EMEA global markets and investment banking business, has joined $1.7 billion alternatives group Duet as its chief executive. Duet Group, which started in 2002 with just $10 million in a single fund, now has 14 funds, and is looking to further expand its range of strategies, in addition to growing its private equity business.

There may be plenty of doom and gloom among private equity practitioners in the US and western Europe as a result of the global credit crunch that has all but dried up their cheap financing. In Russia, though, the mood among their peers is almost euphoric. "I am amazed by how relatively easy it is to raise money for a private equity fund in Russia," says Florian Fenner, managing partner at UFG Asset Management in Moscow, which is fundraising for its second private equity vehicle. UFG is looking to raise at least $500 million and expects to make a first close at least half that figure in May.

Only suckers believe that the remedies applied to the credit crisis have cured the underlying sickness. There’s more painful adjustment to come, and it could last two to five years.

Private equity is booming in emerging Europe, according to new figures from ISI Dealwatch. But what are the hidden risks?

The Eurasian Development Bank, which was founded in 2006 to finance infrastructure projects in Russia and Kazakhstan, is to expand its remit to include investments in financial institutions, according to its chairman.

The crisis suggests that privately owned banks are not self-evidently better managed nor more effective at allocating capital than state-owned ones.

Leading Russian corporates Gazprom and Evraz both attracted strong support for Eurobond issues in April. Gas company Gazprom sold a $1.5 billion five- and 10-year deal via Citi and Morgan Stanley; steel producer Evraz sold $1.6 billion of five- and 10-year paper via ABN Amro, Calyon, Deutsche Bank, and UBS. Both issues were heavily oversubscribed and performed well in aftermarket trading. VTB, the country’s second-biggest bank, is set to follow with a $1 billion issue, the first in a series of transactions that will involve it seeking $4 billion of foreign funding this year.

A plentiful supply of cheap, high-quality farmland means Russia may become key in the drive to solve global food shortages.

A reduction in foreign capital flows means that many banks in eastern Europe are indirect victims of the credit crunch.

On February 5, Ukraine received the welcome news that after 14 years of often tortuous negotiations its membership of the World Trade Organization had finally been approved by the international trade body’s general council.

The number of new equity-linked issues in the first quarter of 2008 fell dramatically across all regions in comparison with the same period in 2007.

The arrival of German Gref, apparently with a mandate to build Sberbank into at least a regional if not a global banking force, has generated huge excitement among Russian bankers.

The volume of equity raised by issuers from eastern Europe so far this year amounts to just $2 billion, down from $11.1 billion over the same time in 2007. Eastern Europe ECM volume accounts for just 6% of the total EMEA ECM volume raised in 2008, compared with 14% this time last year.

Visit cities such as Bucharest and one might be surprised by the high-quality cars or food that are available and affordable. Middle class wealth is growing rapidly in CEE, and it brings with it a lot of pent-up demand.