Updated June 3, 2008

   AK BARS Bank is the first Russian commercial bank that has entered the Eurobonds market which has not been available over the financial crisis. It plans to place $450 million securities to maintain loan portfolio growth. If AK BARS succeeded in bonds selling to the western investors, other banks would follow its example placing $250-500 million emission weekly, as experts are sure.

   Several market participants said that joint stock AK BARS Bank was holding road show of Eurobonds issue on 3-6 June this year. An issue was presented to investors in Asia and Europe. ABN Amro and Credit Suisse were acting as its managers. Issue volume for 3-5 years term is planned at around $250-450 million. The bank confirmed information about road show. In AK BARS and in banks-managers refused to comment further.

   AK BARS Bank is the largest regional bank. According to Kommersant Dengi journal data, as of January 1, 2008 the bank occupied the 16th place by book value size (RUR 27,7 billion) and the 20th place by net assets sum (RUR 155,6 billion). The core bank stockholder is Republic Tatarstan. AK BARS Bank has two Eurobonds issues at $175 million and $250 million, and the lesser is paid off in October this year.

   AK BARS Bank became the first among the commercial banks to place Eurobonds at the western market since August last year. "Russian banking sector was the least subjected to risks emerged in terms of the US mortgage crisis. Nevertheless, western investors had distrusted the banking sector as the assets class", says Trust bank analyst Aleksey Demkin. According to him, in May state banks, Russian Agricultural Bank (RAB) ($1,75 billion) and VTB Bank ($2 billion) have conducted the successful Eurobonds placing. Their results demonstrated that foreign investors’ interest to bank securities was coming back. "I would not take into account Eurobonds issue of CHF 250 million placed by Bank of Moscow in March this year, as this currency is rather exotic, and there is little banks which financing is tied to the franc", explains Mr. Demkin.

   AK BARS aim of Eurobonds issue placement was to finance loan portfolio, as suppose market participants. According to an investment memorandum, the total program volume of bonds issue participating in a loan (LPN) was $1,5 billion. According to AK BARS Bank reporting for 2007, loans portfolio allocated to small and medium business grew by 97,6%, and retail portfolio increased by 74%. "It is a dynamic growth that requires additional facilities", as points out Aleksey Demkin. According to 2007 results the average growth of Russian banks’ corporate portfolio was at the 53% per annum rate, retail portfolio – 57%. "Bonds placing is the best way for a bank to receive facilities for financing", as marks deputy director for financial market operations of Nomos Bank Alex Tretyakov, and adds that a bank should increase passives to demonstrate an owner the use efficiency of the invested capital. According to Aleksey Demkin calculations, taking into account the profitability level by the traded Eurobonds issue and bonus paid by issuers within placement, new Bank issue can be placed with 8,5-8,75% per annum profitability (for three years) and around 9% (for five years). In April VTB Bank and RAB have placed their issues with 6,875% and 7,125-7,75% per annum profitability respectively.

   If AK BARS placement was successful, other commercial banks would resume taking loans abroad after a long break. "Now many banks from Top 30 would be pleased to place Eurobonds to refinance or develop their business, but they do not hurry to announce new issue", as reasons director of MDM Bank department for bonds market analysis Mikhail Galkin. According to him, most banks are already prepared for placement and it takes just two or three weeks after the decision has been taken about market entering till a real deal. Experts note that such banks as Alfa Bank, Promsvyazbank, Nomos Bank, URSA Bank and TransCreditBank "are standing in line" for money of foreign investors. "If placing started, they would take place once a week, and issue volumes would total $250-500 million", sums up Mr. Galkin.