Russia and Ukraine

Five CIOs discuss asset allocation changes in light of the tension in the border countries.

While OTP and Raiffeisen are vulnerable to FX losses and a slowdown in Russia and Ukraine, the impact should be manageable, though there are some exceptions.

Russia’s muscular posture on the Crimean region of Ukraine, re-awakening Cold War tensions, threatens to tip the economy into a mild recession and has put a spotlight on the country’s structural weaknesses amid political risk, say analysts.

Although current account deterioration, persistent capital outflows and the Ukraine crisis would seem to weaken rouble, the central bank’s flexible FX regime should keep the currency out of turmoil, say analysts.

The scale of Ukraine’s challenge to correct economic balances is staggering, even if a political consensus is reached that would see an IMF support package. What’s more, markets might be understating sovereign default risk given strict debt covenants in the 2015 Russian-backed dollar bond that is sure to be used in a regional chess game, say analysts.

There was no shortage of bond issuance from emerging Europe in the early part of 2013 before tapering fears set in. While deal sizes and volumes hit record levels, however, innovation was thin on the ground.

Central and eastern Europe is attractive for private equity houses. But they need to get their priorities right.

In an in-depth interview with Euromoney, the head of the powerful Russian state lender discusses domestic bank competition, regulation, credit growth and reveals the impact of state ownership.

VTB’s chief executive likens his role in Russian banking to that of a surgeon in a state-owned clinic. He’s certainly carved out a strong position in corporate and investment banking. He insists he can operate successfully in Russia’s new state-controlled capitalism, while resisting political pressure. Can he make what critics call his ‘grandiose scheme’ for VTB work?

Russian and western firms have shovelled millions into investment banks in Russia. Although their ranks are much diminished, they remain dug in: doggedly hopeful, despite little chance of a change in their prospects.

A new generation of firms are seeking market share from more established players in an already crowded investment-banking scene.

As growth slows, Russia needs to become less volatile as a market.