CFA Association Russia held the seminar on Aspects of project valuation on the example of bank and non-bank microcredit businesses

On the evening of April 16 at the Hyundai Motorstudio hall on New Arbat, a 2-hour seminar was held on the theme “Aspects of project valuation on the example of bank and non-bank microcredit businesses”, organized by the CFA Association Russia. Leading the event were two prominent specialists in the field of business valuation and investment banking: Denis Sitnikov, CFA, and Maxim Russkikh.



In his presentation, Maxim Russkikh gave a detailed overview of the current state of microcredit, drawing attention to the differences between the banking and non-banking segments such as the credit profile of clients, the range of services, and regulations. In addition, as distinctive features of microfinance organizations this expert pointed to the high turnover of capital and its structure which, unlike in the case of banks, consists mainly of share capital and shareholder loads.

Although these differences seem quite obvious, Maxim Russkikh is convinced that in the long term, the intersection of the bank and microfinance organization client base will only grow. “It’s likely that in the future, microfinance organizations will gradually transform into the same banks, just with higher interest rates,” he says.

Russkikh also touched on the relatively new development of internet financing (P2P), which is rapidly gaining popularity abroad. “Within 30 years or so P2P will completely replace bank and certainly microcredit lending,” Russkikh predicts. “The costs of internet lending are minimal.”

Denis Sitnikov in turn elaborated on the practical aspects of business valuation of banks and microfinance organizations. “In analyzing the financial reporting of banks and microfinance organizations, you need to understand that, if the former should be seen as banks with appropriate balance indicators, then the latter act more like traditional manufacturing or service companies. Banks have neither revenue or EBITDA, while microfinance organizations have all of that.” Such is the basic idea that this expert raised.

The current situation in the banking sector, in Denis Sitnikov’s opinion, looks rather positive. As he sees it, “All the bad things that could have happened with Russian banks, in terms of reporting, already happened with them in 2014.” Domestic banks today, judging by the market multiples, are trading with a significant discount over Western credit institutions. The fact that some of them are valued less than their own capital, suggests that the risks of negative revaluation of bank assets are already included in the value.

This seminar served as a prologue to a more ample, in-depth course that these authors have prepared and plan to launch in the near future.