Citywealth Profile: Baltic International Bank
6 July 2011
Citywealth Profile: Baltic International Bank
On the Eastern borders of the European Union, you’ll find the Latvian headquarters of the Baltic International Bank. Established in 1993, two years before Latvia became an independent state after its split from the Soviet Union, Baltic International Bank is the size of a small UK private bank: the Bank look after the financial interests of around one thousand five hundred clients with assets under management close to three hundred and fifty million Euros.
The majority of their clients are of Russian and Ukrainian descent and in 2005, when a number of them became permanent UK residents, the bank saw the opportunity to set up a satellite representative office in London’s Mayfair. This is now headed up by Anthony Christodolou, a former entrepreneur, at 77 Brook Street in London W1.
Ilona Gulchak, the Chairman of the board, said of the expansion, “We wanted to continue being near to our clients, and understanding their needs. We also saw it as an opportunity to study the UK market and possibly obtain a full license from the FSA in future. We felt that being a bank from the European Union, with representative offices in Moscow and Kiev, and expertise working in the CIS markets, was a unique position to have in London and offered a strong advantage.”
Like many countries around the world, Latvia has experienced economic turmoil over the past couple of years, due to the global financial crisis, and just like Britain, the country is making public spending cuts and tax rises earlier, rather than later. But despite these austerity measures, Latvia's economy showed 2.4 percent year-on-year growth in the third quarter of 2010, and became the first EU country to emerge from the recession. 2010 was a good year for the bank too. Baltic Bank International was named Best Bank in the Baltic States by a Russian publishing house.
Despite global economic difficulties, Baltic International Bank remained stable and secure throughout the financial crisis because they didn’t take part in any risky financial ventures. Instead they have always taken a conservative approach to the management of assets which is a guiding principle introduced by the banks major shareholder, Valeri Belokon.
Belokon studied business management at The University of Massachusetts, and today, he has numerous and wide reaching business interests, spanning everything from precious metals, to football – with an investment in Blackpool FC. Last season Blackpool won promotion to the Barclays Premier League to reach the top flight for the first time since 1971. According to Gulchak, “Mr Belokon founded the bank because he understood the needs of the market, had substantial financial contacts locally, who also needed to work globally, just as he did.”
A regular in The Rich List, with more than a billion in sterling, Belokon made his fortune through metal trading, beer production, financial services and media; recently selling a thirty percent stake of his Latvian TV station TV5, to Rupert Murdoch’s News Corporation. As well as enjoying a reputation as a mini media mogul, Belokon owns the gold extraction company, Baltic Gold, and like many wealthy individuals, he is involved in a number of philanthropy projects; such as a not-for-profit scientific organization, and a golf school which teaches the game to six to sixteen year olds. Since February of 2010 Belokon is co-shareholder and Board member of Community Capital with TRH The Prince of Wales and Sheikha Fadia Al-Sabah of Kuwaiti Royal Family and in June he was appointed as The Trustee of The Prince of Wales Foundation for the Built Environment.
In regards to the development of Baltic International Bank’s offerings, Gulchak goes on to explain, “In 1993, the initial operation offered personal banking with fifteen staff. Today, the number of employees exceeds two hundred, and although we offer an incredibly broad range of banking services, we have maintained our individual approach to each and every client.”
Typically, clients are private individuals who have a percentage of their funds abroad, or corporations who are engaged in international business. Both corporates’ and individuals, Gulchak says are attracted to the bank because of its ‘members club’ feel coupled with its flexible approach to finance.
Currently eighty percent of the bank holds private deposits, and twenty percent is corporate money. The healthy amount of private deposits is due, in no small part, to the strategic decision the bank made in 2005 to put private clients needs at the heart of their business. “We built our reputation carefully to attract individuals who want to keep their funds diversified but safe.” explains Gulchak.
Today, the banks private clients fall into three categories: Affluent Individuals, High Net Worth Individuals (HNW), and Very High Net Worth Individuals. Affluent Individuals have investable funds of five hundred thousand USD, High Net Worth Individuals have between one and five million USD, and Very High Net Worth Individuals can place up to fifty million USD, or more with the bank. However, despite the size of many of its clients portfolios, entry level into the bank is an easily accessible hundred thousand Euros.
With regard to cross-border clients, and the issues of cultural differences, Baltic International Bank doesn’t just understand the challenges, they help alleviate them. Gulchak explains, “We understand that Western European companies are wary of Eastern Europe and Russia. Business tends to be done very differently here, which can sometimes look intimidating. But it need not be. There is definitely a different approach, but that is something that we can offer a unique insight and careful stewardship into.”
In 2004, Gulchak was given the responsibility of setting up Baltic International Bank’s anti money-laundering policies and procedures, and through this role, she gained an in depth insights into the local financial community in Riga; developing cohesive, Latvian wide legislation, “During this time I became knowledgeable with all the nuances of clients’ activities, sources of funds, needs and expectations.” says Gulchak.
Ilona Gulchak, Chairman at Baltic International Bank, has had a well deserved and stratospheric rise to power within the organisation. Riga born, she has beauty and brains holding a bachelors degree in political science and a masters in economics from The University of Latvia and although she had an ambition to be a lawyer, she started her career in banking.
In recent years, the bank has hired more staff, in order to comply with risk procedures implemented by the European Union. “We have been heavily regulated.” Says Gulchak, “We have full money laundering checks and processes in place to find the sources of potential funds coming into the bank. We also have various checks over and above this. For example, every potential client needs a recommendation from a validated source that we trust, in order to become our client. It is a particular policy for the bank.”
Speaking from their Mayfair office, Gulchak says she has big plans for the bank, “We have an ambitious strategy for the next five years. We want to maintain the corporate business, but also be an exclusive bank working with HNW clients. From our start up in 1993, the bank has grown to three hundred and fifty million Euros, and the last three years have shown a sharp upward momentum. In five years time I want our AUM to at least have doubled in size.”
Baltic International Bank now has two hundred and sixteen staff, and the reason for this increase has been down to hiring more customer relationship managers (private bankers), and more risk management personnel. They have invested heavily in technology to ensure a faster and higher quality service. “We have more products on offer, have developed a brokerage business, and formed partnerships which give us access to many new initiatives.” confirms Gulchak. “We’ve restarted our Gold program and are working on developing lifestyle management services for HNW clients as well.”
Gulchak goes on to sum up the banks proposition and positioning, “We see ourselves as an ideal platform between Eastern and Western Europe. Aside from providing an opportunity for clients to invest their funds safely, we specialize in looking at deals and deal flows for clients in different markets; which can include anything from mining, to gold, to oil. We also look at deals in the UK, giving our Latvian clients opportunities to invest in things as diverse as film, energy and equestrian. We go the other way too, in deal flow with alternative energy, ecological food and cosmetic deals coming to the UK from Latvia and/or CIS.
These days, we concentrate our efforts on finding deals which excite our HNW clients, and at the Baltic International Bank, we definitely like to think outside the box.”
Head of London Office
Baltic International Bank
T +44 (0)20 7495 7695
M +44 (0)7905 529805