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Russia's Tinkoff plots solo course as MSCI inclusion beckons

* Tinkoff a candidate for February MSCI inclusion

* GDRs in Moscow up around 30% year-to-date

* Tinkoff says governance changes to come in 2021

MOSCOW, Jan 26 (Reuters) - Russia’s Tinkoff plans to go it alone after merger talks with internet giant Yandex collapsed, the online bank’s international investor relations head said ahead of a possible MSCI upgrade next month.

Tinkoff, which is Russia’s largest online bank with more than 13 million customers, has performed well despite the coronavirus crisis thanks to an influx of retail investors.

Neri Tollardo told Reuters that Tinkoff was growing quickly on its own, with non-credit businesses including its acquiring business and banking services to SMEs helping the lender to diversify and offset any potential weakness.

TCS Group, Tinkoff’s parent, forecast in November that its net profit for 2020 would be around 16% higher than the year before, a month after a potential $5.48 billion cash-and-share sale to Yandex fell through.

And a cut in founder Oleg Tinkov’s voting rights to 35% from 84% alongside the prospect of inclusion in the MSCI Russia Index have sent TCS shares in London up 23.4% year-to-date and its global depositary receipts 30% higher in Moscow.

Tinkov in early January said his share conversion paved the way for further, wide-ranging governance changes.

“That’s a pretty big signal that we see our future as a standalone company,” Tollardo said. “The share conversion was one more step in this direction.”

Growth in clients and brokerage fees and diversification away from credit-card lending into home equity loans are among the drivers making TCS one of the top fintechs in emerging markets, UBS Research said in a January note.

TCS shares have flirted with the required level for a February MSCI upgrade, even as sanctions risks and oil price swings have hit Russian assets.

The stock returned to the necessary price level, above the threshold of $40.40/GDR on Friday, VTB Capital strategists said on Monday, putting the likelihood of an upgrade at 80%.

“MSCI inclusion means more flows. It helps us broaden the investor base definitely and that’s obviously the main benefit,” Tollardo said.

Editing by Katya Golubkova and Alexander Smith

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