Euromoney Magazine. Infrastructure financing: Eurasian Development Bank broadens strategy.

Sudip Roy

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.

"We are looking to take block stakes in banks, especially those that have cross-border networks," Igor Finogenov tells Euromoney in an interview in London.

"The main idea," he adds, "is that the [investment in] the bank will help us fulfil our mission. We wouldn’t take stakes to help bail out failing banks. That’s not our role. We don’t have such a mandate."

Instead, says Finogenov, the EDB’s purpose is to facilitate economic growth and regional integration among the Eurasian countries. For that reason any investment in the financial sector will be made in institutions that focus particularly on trade finance and SME lending or are planning to do so. Typically, the EDB will seek to take stakes of about 20% and have a board presence, adds the Russian chairman. Finogenov hopes that the EDB will make its first investment this year, most probably in a Russian bank. The investments will be for between three and five years, although Finogenov denies that the aim is purely a commercial one. He says that there will be a strategic rationale behind them too.

The Eurasian Development Bank was set up by Russia and Kazakhstan. Based in Almaty, it has a capitalization of $1.4 billion and has made $400 million of investments in projects largely in the power and transport sectors. Besides expanding into the financial sector, the bank will start investing in the IT, cement and manufacturing industries.

New member

The EDB is also poised to gain a new shareholder in the next few months after Tajikistan applied to become a member. Finogenov reckons the process will be completed within the next three to four months. Tajikistan will take a $500,000 stake in the bank. "It is less about the money than the jurisdictional implications [about Tajikistan’s membership]," says the chairman. "It will allow us to operate freely in Tajikistan and attract investment to Tajikistan." The EDB is in conversations with the governments of Belarus, Armenia and Kyrgyzstan about their possible membership of the bank too.

Finogenov also outlined the bank’s funding intentions. The EDB will borrow $200 million to $300 million via the syndicated loans market this year. The bank is watching developments in the international bond markets too. At the end of last year it postponed plans for a $300 million Eurobond as part of a $3 billion MTN programme because of deteriorating market conditions. The bank has no imminent plans to access the market because it would be too expensive. "One of the reasons I am in London is to understand how investors perceive us and what sort of price they want for our risk."

Finogenov is keen to stress to investors that the EDB is not a commercial bank and has none of the risks associated with the Kazakh commercial banks. Last month Fitch affirmed the bank’s BBB+ long-term foreign currency credit rating with a stable outlook, despite the growing risks to Kazakhstan’s external finances.

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