Russian Lender TCS Group Falls Below IPO Price in London Trading

TCS Group Holding Plc (TCS), the owner of Russia’s Tinkoff Credit Systems, declined in London trading on speculation it may have to set aside more money for souring loans, according to an investment manager.

The company dropped for a fourth day, losing 5.5 percent to $17.07 by 2:07 p.m. TCS was priced at $17.50 in its initial public offering on Oct. 22, valuing the lender at $3.2 billion.

Asset quality for Russian banks “continues to deteriorate,” said Gregory Klumov, portfolio manager with SBD Global Fund in Cyprus who said he has started shorting the stock. TCS “will have to significantly increase loan provisions next year,” he said.

Shorting involves selling borrowed shares and making a profit buying them back when prices decline.

Goldman Sachs Group Inc., which helped arrange TCS’s IPO, said “leverage” in consumer banking is at a record high amid a slowing Russian economy and increasing consumer indebtedness, in an analyst note to investors this month. Russia’s consumer-finance banks face an increase in bad loans in the unsecured retail lending market, Moody’s Investors Service said last month, citing TCS among those with “heightened risks.”

Oliver Hughes, chief executive officer at the bank, declined to comment by telephone today.

Since it was founded in 2007, Tinkoff has issued more than 3.5 million credit cards in Russia and ranks third in such lending, according to the company.

“We expect further shorts to be opened on the stock,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, wrote in e-mailed comments today. “We do not usually like to short stocks on valuation grounds, but this is an exception. We are targeting the stock to trade below $17 in the very short term.”

To contact the reporter on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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