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Commentary

Russian Online Lender Tinkoff Gets a $3.2 Billion Valuation

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Tinkoff Credit Systems, a credit card lender I’d mentioned earlier (Man Wins Credit Card Court Case When Bank Didn’t Read What It Had Signed) has, it seems, gotten its reward in a blockbuster IPO.

Oleg Tinkov’s bank has no branches. It only lends online. And it has gotten a $3.2 billion valuation, at a price that is about 5 times book value, in an $1 billion IPO. The IPO will only see $175 million go to the company; the rest is stock being sold by existing shareholders, including private equity firms like Goldman, and then Tinkov himself.

But the problem in selling credit cards online is obviously the high degree of defaults. Writes Yahoo:

"TCS is one of several Russian banks offering credit cards online — an aggressive way to expand the consumer lending business that appears to come with higher risks than most other types of loans. The streamlined approval of credit cards, however, seems to attract the worst possible kind of delinquent borrower. These borrowers buy a TV or another big-ticket item on an instalment plan, use it for a few months, and then, instead of paying off the loan, give up the item, and move on to another bank. The bank would certainly repossess the item, but the market in used electronics is rather slow at the moment, and used prices are nowhere nearly as high as new," writes Russia!.

But when there is enough liquidity to go around, you will hardly give a rat’s behind about insolvency. Tinkoff Credit Systems certainly had the last laugh!