As some of Europe’s
largest lenders retreat from trying to gain a foothold in Russia,
opportunities are opening up for banks based in the former Soviet
states to expand their Russian operations. Duygu Tavan speaks to
Andrey Timchenko, managing director of Kazkommertsbank about the
lender’s Russian ambitions.


Bar chart showing Russia's top 10 banks by retail deposits in AprilThey say one
man’s loss is another man’s gain. And if media speculation proves
accurate, Kazakh lender Kazkommertsbank could be about to more than
double its branch network in Russia.

Kazkommertsbank, Kazakhstan’s
largest bank by assets and second largest by retail deposits, has
emerged as a potential bidder for the ailing Russian retail banking
business of Barclays.

Barclays CEO Bob Diamond is
determined to sell off the business, less than three years after
the UK-headquartered lender paid $745m to acquire 32-branch-strong

The sale could be concluded
for as little as one-tenth of the purchase price. Diamond admitted
in February the Russian retail banking sector was just too
competitive and dominated by the state-owned lenders.

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Barclays’ fate is no
exception. HSBC sold its Russian retail business in mid-June to
Citi, which has a stronger foothold in Russia as it has been
present there since 1993 – unlike Barclays and HSBC, entrants to
the market in 2008 and 2009 respectively. And in June, BNP Paribas
managed to hold on to its consumer lending ambitions by agreeing a
joint venture with Russia’s largest bank by assets,

Société Générale is the only
other West-European bank alongside Citi to maintain large-scale
retail operations in Russia and is targeting a top-three position
via its 74.8% stake in Rosbank.

Central European lenders
UniCredit and Raiffeisen are the only other major European banks
with established businesses in Russia.

“We know we are not going to
be one of the top banks in Russia, but we believe we can gain some
market share and be profitable,” Andrey Timchenko, managing
director of Kazkommertsbank tells RBI.

Although reluctant to confirm
speculation about Kazkommertsbank’s bid for Expobank, Timchenko
says surviving in Russia’s retail banking business requires more
than having the ability to fund an acquisition.

Timchenko believes
Kazkommertsbank can avoid a similar fate to Barclays and HSBC
thanks to the historical and cultural background between Russia and
Kazakhstan and other former Soviet states.

Pie chart showing Russia's 6 largest banks by assets“It is certainly
quite different for us compared to the Western banks,” he says, and
adds: “We are not a local bank and that has advantages and
disadvantages. An advantage is that we are independent [from the
Russian state]. We will not find ourselves substantially
disadvantaged. Of course we will not be able to compete with the
state-owned Russian banks – that is certain. But there still is a
big market for us.”

And big it is: Russia spans
18 time zones and in a country of that size, a physical branch
presence is crucial. Sberbank, the country’s largest lender by
assets, deposits and lending, operates am 19,000-unit strong branch
and agency network.

VTB, the second-largest
lender, has about 840 branches, plus another 380 via Bank of
Moscow, in which VTB acquired a 46.48% stake in

In contrast, Kazkommertsbank
has “no more than 20 branches” in Russia and is pursuing “gradual
growth”, according to Timchenko.

But Kazkommertsbank would not
be completely immune to the challenges faced by non-Russian banks.
One major disadvantage for any non-Russian bank is, according to
Timchenko, lending and debt collection.

“You really need to know who
you are lending to and how to recover that debt. It is the same
case in Kazakhstan, so our strength over foreign banks is that we
are aware of this issue. But our weakness, relative to Russian
banks’ strength, is that we know less than they do how to
effectively collect debt.”

And in a rare acknowledgement
of Russian business conduct, Timchenko admits “there are a lot of
things one would not be able to understand from looking at
financial statements”.

He explains that, in many
cases, the organisational and shareholder structure is not
transparent – there may be business with non-affiliated parties
that are not officially listed.

“We [unlike the European peers] know the rules of the
game, but we don’t necessarily know everyone involved in it,” he