The amount to start with / Private banking

The Ukrainian market of financial services for individuals is roughly segmented. If the customer has up to $1000, he or she may deposit it into the bank or into some investment funds, with more than $10000 into the stock market. The depositor, who owns the amount from $100000 may be designed a personal investment plan into any tools of interest, form deposits and shares to the collections of rare wines. The more considerable the savings, the wider is the range of opportunities.

Banking Fast Food

The minor investors (up to $2000) practically do not have any prospects on the Ukrainian financial market. The native banks, advertising various supposedly affordable services (for instance, financial supermarkets) are factually offering deposits to the minor retail customers. «The minor ones» are surely not their favorite stuff, the bank clerk will merely explain them the deposit differences at the most. The safe way to irritate the clerk is to ask him about the optimum deposit currency. Strange, but the minor banks, which would seem to treasure every customer of theirs, follow their “elder brothers”.

JSIB “UkrSibbank” is a rare exception. It opened several investment funds and the capital management company and the “Universal” bank, which created the investment fund together with asset management company of “Rosan-Capital”.

Despite this, the minor depositors have a choice. Alongside with the standard deposits (in UAH, USD, Euro) the minor depositors can also purchase the metallic deposits. Such type of the deposits is actively promoted by Aval, Nadra and Brokbusinessbank. The principal difference between the metallic (the customers usually chose gold) and the standard deposits is that in the first case the income consists of the two parts: the fixed interest rate and the increase of the bar’s value. Generally the banks deposit the golden bars with the total weight of no less than 50 grammes, that is the minimum deposit amount should make about $950-1000. But it is preferable that the customers chose the large bars (50 and more grammes) — one gramme of the 100-gramme bar will cost less than one gramme of the 10-gramme bar and the large bars go up in price faster than the small ones.

Forex, which is widely advertised, is another way to manage the minor savings. Forex is stock market game on the increase/decrease of the currency exchange rates. But the minor investor will have to play it by himself, because the experienced broker will hardly be interested in the managing of $500-1000. Factually there are no obstacles for this kind of investment — only the guarantee payment in the amount of $200 is required. But this tool has many drawbacks: the high risk of the money loss (especially for the newcomers), the expense of opening and service of the current account, and certainly the need to pay the income tax.

The small tricks of the stock

At first sight even the small investor has a chance to increase the funds, if he or she applies to the asset management company. There are several funds with the minimum entry limit in Ukraine (the nominal cost of one certificate/share is UAH 10 to 1000). These are the fund Classic («Kinto» company), Parex Ukraininan balanced fund, Parex fund of the Ukrainian bonds (Parex Asset Management), Balanced premium fund (Socrates) and the Stable income (UkrSib Asset Management). But the minor investments into the investment funds practically do not work out. The considerable part of the investors’ income is spent for the payment of various commission fees — to open and service the current account and the security account, the agent’s commission as well as the income tax. That is why the investors, who have only the necessary minimum of UAH 1000 rarely apply to the Classic fund, more often the amount is UAH 5000 to 10000.

Theoretically, having several hundred of dollars one can become an owner of a company’s minor share package, which is high-rated at the native stock market. But it is practically impossible to find the seller of such a package. For that matter, such deals will apparently prove unprofitable, as the Director of «Kinto LTD» Sergey Chernenko put it. The cost of their conducting may total up to 20-30% of the amount, which the investor has. «The commission payments of the top-class brokers are quite high. If the deal amount is not large, as a rule they are fixed (one deal may cost $40-50). Besides, the deals of securities purchase and sale require the additional expenditures for the services of the securities’ keeper and the bank services, connected with the payments », explains Chernenko. Thus, if the spread and the transaction expenditure are wide (spread is the difference between the sale and purchase quotations), the investor will not bear losses only if the share significantly rises in price. But such rising can hardly be forecast even by a very experienced analyst.

Ukraine is just a far cry in comparison with Russia, any student with a minimum start capital can receive profits from the shares. For that one only need to go online and open the account at the Internet-broker’s office and buy the necessary shares or the investment funds’ shares. «In Ukraine it is hardly possible because of the low market liquidity and the underdeveloped infrastructure (absence of the online brokers)», explains Igor Mazepa, the GM of «Concord Capital» investment fund. Sergey Chernenko also complains about the absence of conditions for the proper Internet-trading. «There is no real electronic flow of documents, the «request market » in PFTS», says the specialist.

Profiteering for the the average investors

The best profiteering prospects have the private investors, who own the amounts of more than $2000. The investment options for these individuals are supposedly the same — deposits, investment funds, Forex, but there are some principal differences. Firstly, the investors, who are willing to risk their $2000-3000 have access to the closed investment funds, including the high-profitable ones, which specialize in the shares. Secondly, the minor banks often attract the customers by offering the bonus interest on the deposit accounts.

Thirdly, the amount of more than $3000 is accepted by the Forex experienced brokers. Finally, $5000 is an amount, which may present interest to the minor investment company, which offers broker services on the equity market.

The major or leading investment company according to the PFTS trade volume will only be interested in the customer, if the latter is able to invest not less than $10000-15000. According to Sergey Chernenko, that is the precise minimum, which can bring investor the real profits at the stock market. The prospects of work with the broker of a reputed company look attractive.

Having indicated the underestimated enterprise (based on the own calculations or on the analytical materials of the investment company’s specialists) or, for instance, having discovered, that certain bank will be acquired by the major Western investor, one can earn up to 1000% per annum. «now it is worthwhile to pay attention to the medium companies with the annual sales of $20-30 mln.

If such company has some kind of a sensible strategy, and its financial indicators grow stably during the last few years, its shares package with the cost of $10000 will be estimated as high as $50000 and more», says the broker of «Concord Capital» Eduard Mascheno. According to him, the native middle class already approaches the state of readiness for such speculations. Although many people, who risked to trust their money for the stock exchange game, stop these speculation after a certain period of time, because they either lack the money or the passion for that. But within some two years the private investors will be working very actively in such a manner, the broker thinks.

The Verkhovna Rada already approved of the securities’ traders right to accept the citizens’ money into asset management. Earlier only the banks had this right, and the investment companies only could manage the citizens’ assets via the asset management company. According to the new Law «Of securities and stock exchange» the traders will be able to sign the asset management agreements with the citizens for no smaller amount, than the equivalent of 100 minimum wages (UAH 35000).

In Russia some $10000 is a minimum amount, which can be granted for the asset management. I Ukraine this limit is a lot more significant, and the very service is not yet widely spread. It is being declared by the banks, but they barely have the private settlors.

The development of the stock market speculations is impeded by the problematic normative base and the underdeveloped infrastructure, which was mentioned above. «The Russian traders attract the funds of the individuals and trade fast on the RTS by their order. In Ukraine it is next to the impossible to purchase and sale any securities», says Eduard Maschenko.

VIP-investments

Meanwhile the large investors, who can trust several dozens (or even hundreds) of thousand dollars to the bank or the investment company are offered a large number of capital investment projects on the Ukrainian financial market. For instance, the spare $20000-50000 make it possible to become the VIP-customer of the minor bank and accordingly to be assigned a personal manager and adviser. «In our bank the customer, whose deposit is not less than UAH 200000 or $40000-50000 can be assigned a status of VIP-customer», —says Svetlana Korotaeva, Deputy Chairman of Board of the Regional development bank. Overnight is one of the special products, which is offered to the VIP-customers by the bank: the large deposits are accepted on holidays and weekends.

The owner of at least $100000 may become the VIP-customer or the private banking (personal bank service) of the large bank. The depositor with this amount of savings will necessarily be assigned a personal manager, who will inform him about all the bank products and will help to make an individual investment plan. The general rule of the bank for work with the well-off customer is granting of the privileged tariffs for the classical bank services.

The private banking customers have access to all the investment services, such as securities purchase, asset management, individual investment funds, real estate investments. Besides, the VIP-customers are supported in the valuables, antiques and rare wines investments, and are provided the other all-new services for the Ukrainian market, such as servicing of the family budget, test-drive of the deluxe cars, organization of business trips. The bankers are making this effort not for nothing: according to Aleksej Aleksandrov, Director of the Personal banking service of JSIB «UkrSibbank», one customer of the private banking business equals to 200-250 retail customers according to the amount of the consumed bank products. The game is worth the candle.

Despite this, the Ukrainian private banking has its peculiarities. The most prosperous citizens, according to the bankers and investment businessmen, rather tend to save the capital than to multiply it. The major native depositor is extremely conservative: the private banking customers take the consumer and mortgage loans (which is not at all characteristic for the Western millionaires), do not invest in anything other than deposits and the investment funds (the Western bankers deal mostly with the search of the undervalued securities for their customers) and do not trust the bankers in terms of the tax planning. However, Oksana Sheremeta, Deputy head of the Department for private VIP-customers service of «Nadra» bank forcasts, that asset management will be one of the most demanded services. «First of all, the level of revenues for the deposit accounts tends to come down every year. Secondly, the customers wish to know for sure, what the bank will do with their funds and will chose the terms of the funds’ placement and the profitability level for the given period », says Oksana Sheremeta.

Investment companies are also ready to form the individual investment portfolios. The millionaires’ demand for their services is higher than for the same services of the banks (this is the factor of personal acquaintances and the trust to the professionalism of the concrete managers). However, the investment volume requirements in the large company may be higher — from $200000. «The average portfolio’s volume in our company is $500000. The service is in demand, but we have few of such customers », says Igor Mazepa.

On the contrary, the middle class is interested in the stock market, actively participates in the investment funds, despite the fact, that the high market entrance level and the underdeveloped infrastructure make this game accessible only for the few. But in several years the situation will change dramatically. Anyway, the first step was made — the Law «În securities and stock market » was adopted.

Experience

No choice

The native customers can take advantage of the significantly lesser amount of the investment tools than Europeans and even Russians. The latter, for instance, can now play at the shares’ rate (also in the Internet), deposit into the investment funds, hedge-funds and into the general funds of the bank management. Hedge-funds differ from the usual investment funds in the sense that they are not obliged to follow the investment declaration (for instance, invest precisely 40% of the funds into the shares, ànd 60% in the loan securities) and may invest the depositors’ money in whatever they want.

For instance, the Russian hedge-funds receive profits from the price difference of the shares and ADR. Investment and hedge funds, which specialize in the securities of the developing markets enjoy the popularity in Europe. But the entrance limit of the hedge-fund is significantly larger than that of the investment fund and makes a minimum of $1 mln.

Despite the fact, that the Ukrainian investment funds are legally permitted to invest into the foreign assets, they cannot do it in practice, as the maximum foreign company share purchase agreement term is 3 days, and it takes up to 30 days to receive the NBU license for the purchase of the foreign assets. What is more, the native individual investors are prohibited by the law to invest funds into the foreign assets. By the way, the Russians can easily invest abroad up to $50000.

Besides, the investors from the developed countries eagerly trust their money into the asset management. This tool also currently enjoys popularity in Russia, the so called bank management funds are the serious competitors of the investment and financial companies.

The deposit products of the foreign banks are also significantly more diversified. We are witnessing the growth of the minimum interest rate deposits’ popularity, which offer the additional profiteering options. For instance if the exchange rate of Euro to Dollar, envisaged by the deposit, is increased to the value, envisaged by the deposit, the depositor receives the increased profit, which is proportional to this increase.

Examination

A loan of $100000

Aleksej ALEKSANDROV, Director of the Personal banking service of JSIB «UkrSibbank»

— For the major customers, who are ready to trust in $100000 and more, it is more important to save the capital than to multiply it. Such depositors do not search for the high profitability, preferring, firstly, the foreign currencies (lower risk), secondly, allocation of the funds on the deposits (more conservative).

Our customers invest the symbolic amounts into the funds, managed by the asset management companies — right now they are merely testing this financial instrument. They rarely request the securities’ purchase. They are also not investing much into the real estate, which is being constructed. We recommend the reliable companies to those customers, who are interested in the investments into the rare wines of the antiques. But this market is not yet well-regulated, that is why it is quite problematic to recommend the collection investments.

By the way, our customers use overdraft — they take loans for the consumer needs, for car and accomodation purchase. That is the basic difference between the native and Western private banking customers, the former are more inclined to invest the funds than to spend them. In the West the private banking is more oriented at the equity market, pension funds, tax and financial planning, fiducial services. This all is so far only at the initial stage in Ukraine.

No small ones

Igor Mazepa, GM of «Concord Capital» investment company

— In order not to fail on the equity market, it is desirable that at least some kind of the portfolio is formed, i.e. to invest the money into different assets. At this some UAH 5000-10000 should be invested into every type of the possible assets — if the amounts are smaller, the transaction expenditures will be too high.

However, it is not easy to find a share package for this amount. The small packages are kept only by some of the investment companies to maintain liquidity. And even having such package, the investment company will hardly hand it over to the minor customer.

As a rule, the companies work with the professional investors, which are ready to purchase the securities for a minimum of $10000. The average agreement volume per one customer of our company is $500000. The work with minor customers can be profitable for a company only when the annual agreement volume is estimated in hundreds. In the present state of the stock market and the investment culture it is hardly possible.

Generally, we have three categories of the customers. The first know for sure, what securities they want to invest their funds in. The second ask for our offers and consultations, concerning what place to invest in, but take an independent final decision. The third bring the money, specify the desirable profitability and risk and trust in the formation of the portfolio to us. The portfolio’s profitability depends on its riskiness and may amount up to 30 - 200% per annum. Last year we formed the $700000 low-risk portfolio for one of our customers. Now this portfolio costs about $950000.

Natalia ZADEREJ

The Ukrainian business weekly "Kontrakty" / ¹ 15 îf 10-04-2006