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Title: Q1 2025 Shines for Russian Investment Banks on Debt Market: A Breakdown
Russian investment banks hit the bullseye in Q1 2025 on the debt market. According to Cbonds, these industry titans executed 136 market placements (not counting their own), piling up a jaw-dropping 1.35 trillion rubles – more than doubling the results from the same quarter last year. Gazprombank took the lead, accounting for a staggering 76% of the entire market. The anticipation is high for the upcoming quarters, as issuers scramble to refinance their debts.
The rankings saw a shakeup. Gazprombank kept its crown by volume in market placements of corporate bonds (excluding its own issues) during Q1 2025, with a whopping 292.4 billion rubles in 92 issues. Alfa Bank nabbed second place, jumping from fifth a year ago with a result of 217 billion rubles. "VTB Capital Trading" climbed from fourth to third, chalking up nearly 200 billion rubles.
The reporting period saw a total of 1.35 trillion rubles in market placements, a significant jump from the 0.6 trillion of Q1 2024.
Tale of the Tape: Market Consolidation
The market narrowed its focus on the big guns, with the top 5 companies cornering over 76% of the total capital raised by issuers on the debt market, up a notable 22.5 percentage points compared to the same period in 2024. This shift is attributable to the entry of top-tier companies onto the debt market, who often prefer the services of large banks. Approximately 52.1% of the total volume can be attributed to 20 large deals surpassing 30 billion rubles. Nearly 72% of these large deals went to 17 real-sector issues in five industries: oil and gas, railway transport, metallurgy, chemistry and fertilizers, and retail.
UBS Currency? Not So Fast
The increase in foreign currency bond placements by Russian corporate issuers since the start of the year has caught the eye. Companies in the real sector rule the game. Artem Starikov, head of debt capital management at Alfa Bank, points out that only a handful of banks can provide underwriting for foreign currency placements. The largest organizers made their presence felt in two-thirds of all Q1 deals, totaling over $1.8 billion.
Munches and Crunch: Commission Rates on the Rise?
Despite the surge in placement volumes, bankers are skeptical about a proportional increase in remuneration. Robert Smakeev, head of the capital markets department at Sovcombank, explains that the commission size depends on market volatility, the complexity of the deal, and competition among banks. Issuers with bad credit, or deals requiring hefty documentation and investor interactions, can expect higher commissions. The average commission for bond placements ranges from 0.5% to 1%, with success fees excluded.
The Long (and Winding) Road to Remuneration
Deals can take considerable time and effort to complete, often stretching over several months. Some deals are tailor-made for specific issuer tasks, while others are part of regular fundraisings. Working with established market issuers and debutants demands a different approach, according to Eduard Dzhabarov, head of capital markets management at Sberbank. Waiting for the annual results is advisable when evaluating the outcomes of work, rather than relying on quarterly ranking figures.
Russia's Financial Challenges: A Bumpy Road Ahead
Despite the optimism surrounding Q2 and beyond, the financial landscape for Russian corporate issuers remains rocky. The continued tight monetary policy of the Bank of Russia, with inflation expected to remain high throughout 2025 before returning to target levels in 2026, puts a damper on the broader financial environment. Additionally, Russia's ability to process and settle international payments has been impacted by sanctions, making trade more difficult and accumulating trade credits.
Sources:Cbonds; Vitaliy Gaidayev, Kommersant (April 30)
Insights:- Sanctions and economic challenges have made the Russian financial landscape difficult for corporate issuers.- The trend for Russian corporate issuers is likely influenced by their ability to navigate sanctions and access international markets, which may prompt a focus on alternative financing methods like trade credits.- Commission rates might be higher due to increased risk in the current economic and financial climate.
Investment banks in Russia, particularly Gazprombank, Alfa Bank, and "VTB Capital Trading," dominated the finance and business sphere in Q1 2025, with the top 5 companies accounting for over 76% of the total capital raised in the debt market. This trend is partly due to the entry of top-tier companies, who often prefer the services of large banks for their investing needs. However, the financial challenges for Russian corporate issuers remain, as they grapple with high inflation, tight monetary policy, and the impact of sanctions on their ability to process and settle international payments.
