THE WEST IS full of misconceptions about central and eastern Europe. The first, and most common, is that eastern Europeans cannot wait to get out of their native countries to find work or benefits abroad. For financial professionals at least, this is untrue.
In fact, some of the brightest young entrepreneurs in the region, have moved back to their home countries after successful careers or educations abroad. Examples profiled here include: Alisher Djumanov of Carthill Capital in Uzbekistan; Askar Elemesov, deputy governor of the Kazakh central bank; and Adam Farkas, CEO of CIB. The brain drain is being reversed, as bankers and businessmen look to use the skills they have acquired abroad to build their own domestic businesses and help the local economies.
Secondly, the west often thinks that all the M&A activity between east and west is one way ? US and western European companies buying bargain-priced companies in the east. That's wrong too. Of course, many CEE banks have been bought, but several, such as Parex in Latvia or OTP in Hungary, have stayed independent, and are now making acquisitions abroad. OTP famously beat Erste Bank in the bidding battle for Bulgarian bank DSK last year, and Parex recently bought a bank in Switzerland.
Other eastern European companies are also expanding internationally and looking to break into western markets. Andrey Klishas, chairman of Interros, oversaw the largest US-Russian merger ? in which Norilsk Nickel, a Russian company, bought Stillwater Mining, a US company. Roustam Tariko, a Russian entrepreneur also profiled here, is looking to build a Russian umbrella brand in the model of Virgin or Disney. He says: "If you ask me what is in my mind, I will tell you. It is the world, not only Russia."
Finally, the west often believes that corporate governance standards are always exported to the east. This is wrong too. Here, we profile local reformers such as Zaur Ganiev, manager of UES's pension fund in Russia, who could teach western fund managers a thing or two about transparent management.
The accession of 10 eastern European countries to the EU closes one exciting chapter for business in the region, and opens another. In the following pages, Euromoney celebrates the work of some of the most exciting young entrepreneurs from the region.
Turkey is a few steps further back in the process of preparing for EU membership and its banks and their customers face unique problems that spring from years of government financial mismanagement. The state's dependence on domestic borrowing turned most banks into rentiers making large returns on government bonds ? a focus that starved the private sector of all but the most short term, most expensive, forms of funding.
In this capital markets desert, the Turkish financial entrepreneurs profiled below are expert at making gains by applying local knowledge. As one of them remarks, this facility counts for more than capital and "at this point a foreign partner would slow us down".
At the same time, though, they have a broader vision of being at the forefront of a capital markets revolution that would transform the Turkish economy, creating investment banks in the US mould.
Alexander Popov: CEO, Rosbank
The Interros acquisition of the OVK network of retail banks for around $200 million in October 2003 was a crucial moment for Russian banking. Previously, Rosbank had been the sixth-biggest bank in Russia, with a decent corporate loan portfolio, but hardly challenging for the top spot in investment or retail banking. Now, suddenly, it has a network of about 350 retail banks, making it a real challenger for the number-one slot in private retail banking.
The competition for that ranking is particularly intense now. Alfa Bank, worried that its chain of Alfa-Express branches is not performing adequately, recently fired its head of retail banking in an effort to step up the fight. NIKoil is also in talks to buy a network of regional retail banks from UralSib. Citigroup, meanwhile, is feverishly constructing new branches from scratch.
Rosbank's acquisition will give it a good chance of catching up with rivals Alfa Bank and MDM ? perhaps even overtaking them. Popov says: "Some competitors are far behind Rosbank now." But the OVK acquisition also raises challenges, not least in integrating different corporate cultures.
At one stage it wasn't clear if Interros would even try to merge the two companies, but Popov says they now have a strategy to do so. He thinks that the banks "could be really well matched to each other", and points out that Rosbank is Moscow-based and has strong connections with business, while OVK has branches all over the country and is focused on retail banking. The bank has also appointed HSBC to help with the integration.
Rosbank isn't standing still in investment banking either. Popov says he hopes it will be the first Russian bank to do a securitization, of credit card receivables, in May, though here he will face competition from MDM, which is also planning a securitization issue.
He recently brought on board Guerman Aliev as deputy CEO of the bank responsible for investment banking. Aliev came from Merrill Lynch and Dresdner Kleinwort Wasserstein, and wants to bring western-style financing techniques, such as securitization and equity derivatives, and open them up to Russian corporates.
Rosbank hopes to move into M&A as well, particularly in telecom industries, and says the bank has won a good pipeline of medium-size deals this year.
The bank has also enjoyed good success in its asset management business, though this is partly thanks to winning pension fund mandates for other Interros companies, such as Norilsk Nickel.
Asked about some fund managers' concerns that this poses a corporate governance risk, Popov says their complaints are sour grapes: "A lot of traditional leaders performed badly [in winning pension fund capital]. But that is largely because they don't have a distribution network like we do through OVK, with 500 branches around the country. That is the key success factor."
Popov is now working towards an IPO of the bank, perhaps next year. HSBC is also helping the bank with this project. Rosbank's IPO bid reflects a wider trend among Russian banks to sell to foreign investors ? MDM is looking for a strategic investor prior to an IPO, Vneshtorgbank is slowly preparing to be privatized, and Alfa Bank is also looking to sell to a western bank, as early as this year according to sources. The race into the retail market may really be a race to do the first IPO.