Despite forecasts that Russia’s
two largest banks will report little or no profit in the current
fiscal year, Sberbank and its smaller rival VTB are gearing up to
tap into the pent up demand for car loans. Much will depend on the
recovery of Russia’s fragile economy over the next 12 months.
Douglas Blakey
reports.
Russia’s two largest retail lenders, Sberbank and VTB, are both
aggressively targeting car loans.
Go deeper with GlobalData
The pent up demand for car finance in
Russia, where only 20 percent of the public are car owners, was
brought sharply into focus this year with the long-running and
high-profile sale of Opel/Vauxhall, the European arm of General
Motors, a deal in which Sberbank, Russia’s largest bank, acquired a
one-quarter stake.
Analysts expect Sberbank to use its vast
branch network of around 20,000 outlets as a tool to grow its car
loans business, with talk of the country’s market leader assuming a
role in Russia similar to General Motors’ once dominant US-based
GMAC consumer finance arm.
Anton Goltsman, a spokesperson for VTB’s
retail banking arm, VTB24, told RBI he is confident his
bank is well placed to tap into the increasing demand for car
finance.
Growing an already strong presence in the car
loans sector is a key retail priority for VTB. Its car loan market
share of more than 15 percent is set to be boosted by agreements
concluded this year with a number of car dealers and manufacturers,
including Jaguar Land Rover, Suzuki, Lada and Daewoo.
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By GlobalDataAlready this year VTB, one of the
participating banks in a government-sponsored auto-lending
programme designed to boost the availability of car finance, has
increased automotive lending by more than 11 percent, granting
23,000 car loans in the first six months of 2009.
If the economic trends stay positive, VTB24
vice-president Alexei Tokarev, in charge of the bank’s automotive
lending arm, has talked of car lending increasing by 40 percent in
the second half of the year.
“We still have funds available for car loans.
Our ability to develop our auto loans policy will enable us to
increase our market share, while we will continue to develop our
network of bank representatives in car showrooms, helping customers
sort out finance at the time of purchase,” said Goltsman.
The prospects for short-term growth in auto
lending are encouraging, according to state pollster VTsIOM.
At the end of August, it reported that the
number of Russians planning to buy a car within the next year had
doubled from only 3 percent in February to 6 percent, evidence the
state’s subsidised car loans programme was having an effect. The
poll added that 13 percent expected to buy a car in the next two to
three years, up from 8 percent in February.
Bad loans have peaked
Although Russian banks continue to
struggle with rising loan losses and provisions, with analyst
forecasts predicting sector profits for the current fiscal year
wiped out as the country battles its first recession in a decade,
the outlook for 2010 is altogether more positive according to a
number of domestic and internationally-headquartered lenders.
Italy’s UniCredit has said it will
increase lending in Russia in the belief that Russian bad loans
provision growth has peaked.
Goltsman said VTB24 was forecasting “credit
growth of about 10 percent with deposits surging 14 percent in 2010
on the back of what we expect to be the relatively conservative
position of both companies and individuals that will be more
inclined to save”.
He said it expects bad debt provisions will
peak at around 13 percent to 15 percent by the middle of 2010 and
then decrease in the second half, allowing the bank to restore
profitability thereafter.
In the first quarter of 2009 it posted a
larger than expected loss of RUB20.5 billion ($678 million),
resulting in the Russian state increasing its stake in the bank to
more than 85 percent via a RUB180 billion capital injection.
Its retail arm increased its market share for
personal loans and deposits by 0.89 percentage points and 0.65
percentage points respectively in the second half of 2008, while a
successful marketing campaign to promote its credit card offering
has grown card lending by 56.4 percent since the start of the
year.
Goltsman said the bank was targeting further
market share gains in retail lending and deposits, but added that
its priority task was an improvement in its risk management
systems, including collection of bad debts.
As for the longer term, he is optimistic his
bank is well placed to benefit in the next three years from
“banking sector growth which will accelerate following the economic
revival, mostly based on the rather low level of retail banking
services penetration in Russia”.
“I expect retail credits to outperform and
mortgages will remain the most dynamic segment in the medium-term
both due to government support and significant deferred demand,” he
concluded.
But in the short-term, VTB24 will have to
continue the fight against Sberbank and its smaller rivals without
the benefit of further increases in its distribution network. Its
recent branch expansion programme will take a breather, having
grown its VTB24 branded network in Russia to more than 504 units by
the end of 2008, up from 328 at the end of 2007.
|
PERFORMANCE |
|||
|
VTB – first-quarter |
|||
|
Q109 (RUBbn) |
Q108 (RUBbn) |
% change |
|
|
Total assets |
3,813 |
3,694 |
3.2 |
|
Net interest income |
34.2 |
26.2 |
30.5 |
|
Net non-interest income |
8.5 |
-3.2 |
n/m |
|
Provisions for impairments |
-49.2 |
-4.7 |
n/m |
|
Net profit/(loss) |
-20.5 |
2.9 |
n/m |
|
Source: VTB |
|||
