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International -- Finance: INVESTMENT BANKING
GO EAST, YOUNG BANKER (int'l edition)
Russia's finance industry is luring ambitious Westerners
Rock music filled the grand hall of the five-star Baltschug Kempinski Hotel as a couple hundred of Moscow's yuppie bankers and their dates partied at a $1,000-per-ticket fashion show one recent Friday night. Seated close to the runway, they ogled leggy models and clapped as the emcee thanked a sponsor with the words: "Let's give a round of applause to S-Way International, whose slogan is `Expensive Travel for Expensive People."'
The only ones laughing at that line were a group of U.S. investment bankers, by now well versed in the vulgarity of the Russian nouveau riche. "Only Russians would use high prices as a marketing ploy," says Victor I. Paul, a 31-year-old American and the sole Westerner working at Inkombank, one of Russia's largest lenders.
They may snicker at the Muscovites' gauche ways. But Paul is only one of a growing number of expatriates making the trek to Russia--and staying. Lured by hefty salaries and the chance to cash in on the explosive growth of Russia's nascent financial-services industry, scores of young Americans and Europeans are flocking to Moscow to help local banks set up investment banking arms. "We're constantly looking for new Westerners," says Alexander Bubnovsky, director of international business development at the investment banking unit of Alfa Bank.
Russians are hardly unique in hiring Western bankers. "Even in Berlin and Frankfurt," says Charles Ryan, a director of United Financial Group, "they're drawing talent from London and New York." But the stakes in Moscow are a lot higher than in the more developed markets to the west. A Communist victory in the June presidential election could derail Russia's fragile capital markets and scare off foreign investors, dashing bankers' dreams of huge fees and bonuses.
MILLIONAIRES. The Western bankers remain sanguine. "I think the investment opportunities are the same either way. The process will just be slower if the Communists win," says Alex Mercen, the 38-year-old American who heads Alfa's banking arm. If he's right--and the Russian market takes off in the next few years no matter what the electoral outcome--the yuppie Western bankers stand to become millionaires. It's no wonder the eastward parade of banking hopefuls marches on.
Two big names who recently plunged into the Russian market are Ruben Eingartner, 36, and Dirk Damrau, 33. Eingartner quit as executive director of Creditanstalt's investment bank in Vienna to set up an asset-management business for United Financial, an investment bank started by former Finance Minister Boris Federov, in which France's Banque Paribas owns a 25% stake. Damrau moved from Salomon Brothers International Ltd. in London to head the research department of Renaissance Capital, owned by Russia's Oneximbank and several former CS First Boston bankers led by Boris Jordan.
Jordan is the best known of a wave of Russian-speaking Americans who moved to Moscow when President Boris N. Yeltsin began instituting market reforms in the early 1990s. Many went to work for international accounting firms or Western brokerages and law firms. Now, local financial houses are mature enough to attract Western talent, including bankers who lack Jordan's ancestral Russian ties. Says Damrau: "If you really want opportunity in an emerging market, Russia is the most exciting."
Danielle Downing would certainly agree. At 31, this Wharton MBA is already an old Russia hand. She helped set up the Moscow Commodity Exchange and now is a managing director of Alliance-Menatep, the year-old investment banking arm of Menatep, Russia's 10th-largest bank. Last year, Downing helped her firm plot Russia's first-ever hostile takeover bid when a unit of Menatep tried to acquire control of Moscow's Red October chocolate factory.
The bid failed after Red October's managers pressured workers and Russian institutional investors not to tender their shares. But the issue of takeovers is hardly dead. Because Alliance-Menatep did a lot of work figuring out how to adapt Western tender offer strategies to the Russian system, the Russian securities commission is now using the offer as a model in formulating national takeover rules.
VALUED GUTS. The deal also taught Downing about the differences between Western-style high finance and its rough-and-ready Russian counterpart. In the end, Menatep won two seats on the Red October board and quickly moved to put aside any hard feelings between itself and the candymaker before things got out of hand. With good reason: Last year, several Russian bankers were gunned down after deals went sour. "In Russia," Downing observes, "it's not prudent to goad people into hating your guts. That is, if you value your guts."
There is more to Russian-style investment banking than hostile bids, however. Paul, another Wharton MBA who who helped pay for his Dartmouth College undergraduate degree by trading options from his fraternity house room, is setting up an investment bank for Inkombank. In his role as managing director of Inkom Capital, Paul is helping restructure two of the bank's biggest commercial holdings, the Bubaevsky candy factory and the Samara metallurgical factory, Russia's largest aluminum-rolling mill.
The bank plans to sell 6.5% of the metals plant in a public offering this summer. More privatization deals--and more profits for local bankers--lie down the road: Moscow is starting to allow foreign investment banks to participate in some tenders only if they link up with a Russian partner.
For their efforts, managers like Downing and Paul have been given equity stakes in their firms, something most Wall Street bankers don't achieve until their 40s. But equity is not the only lure. "Come to Russia for the frontier flavor," says Paul. "Stay in New York or London if you're just longing for money."
Nonetheless, even less-experienced expatriate brokers and analysts are pulling in salaries that are double what they could make on Wall Street or the City of London. Downing, who has 10 expats working with her, says securities analysts just out out of college can earn up to $100,000 in Moscow, compared with $40,000 to $50,000 on Wall Street. Young traders with a few years of experience can pull in as much as $80,000 even without an MBA. And those who do have a Western business degree are in great demand. "An MBA by itself is enough to get you a job here," says Thomas Reed, a 25-year-old bond trader.
Despite their growing reliance on Westerners to dress up their image and bolster their business acumen, Russian banks are still the scene of sticky culture clashes. One expat was embarrassed when her Russian colleagues ordered beer at a breakfast meeting with potential Western clients at a fancy London hotel. And some expats have left Russian firms because they felt uncomfortable pushing deals without fully knowing what their Russian partners were doing behind the scenes. "You're never an insider if you're not Russian," says one Western banker.
Russia's hierarchical management style is also a rude awakening for Westerners. At some banks, business virtually shuts down when the boss is out. And Russians are often reluctant to share information with colleagues or clients. "There's no such thing as a memo in a Russian office," says an expat who worked one year at a small investment bank.
Expats at one Russian-owned brokerage in Moscow say managers even monitored employees through phone taps and hidden cameras. "One day all the wall clocks were gone. When they reappeared the next day, a Russian colleague climbed on a chair and showed me the hole in the number 6. Behind it was a camera lens," says an American who left the firm soon after.
Despite the hurdles, Westerners making their way to Moscow's money market are staking their futures on the chance that Russian institutions will turn into the Merrills, Salomons, and Deutsche Morgan Grenfells of the East. Russians have already made huge progress in privatizing industries and building new markets. But to continue the campaign, they will need trained bankers to keep the capital flowing. And the Russians know where to find them. Says Alan Clack, a recruiter at Deloitte & Touche/Ward Howell in Moscow: "There is a vacuum in Russia among financial institutions for knowhow and experience, and there is a ready supply in the West." And as long as demand outstrips the local supply, the eastward trek of MBAs shows no sign of slowing.By Patricia Kranz in MoscowReturn to top