In the stampede for emerging markets
growth, a string of European banking heavyweights have upped their
exposure to Russia’s fast-developing consumer banking market.

Barclays has made one of its boldest emerging markets acquisitions
for a while, snapping up 100 percent of Expobank for $745 million,
while HSBC has announced it is pumping $200 million into its
Russian franchise and starting retail banking in the country.

Other deals include the finalisation of Société Générale’s 50
percent stake plus one share investment in Rosbank, which boasts
Russia’s largest privately owned retail banking network, with 600
branches, and Nordea looking to take its stake in Orgresbank, a top
30 player, to 84 percent (see A big

Expobank had 32 branches and $186 million in assets as of the end
of 2007. The deal by Barclays, which it says will generate economic
profit by 2011, is part of its wider strategy to increase exposure
to emerging markets.

Frits Seegers, Barclays’ chief executive of global retail and
commercial banking, said in a statement: “Expobank is a well-run
bank with a good track record of innovative distribution and
represents a great opportunity for Barclays. Its existing
relationships and infrastructure create the ideal platform for us
to become one of the leading retail and commercial banks in Russia,
one of the world’s fastest-growing economies and a market we have
been keen to enter for some time.”

HSBC’s capital injection will be used to expand its operations
across all business lines and open two new Premier branches in
Moscow and St Petersburg to distribute mass affluent services. HSBC
spokesman Neil Brazil told RBI the bank plans to expand
further across Russia.

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He said: “The injection of capital will mean an expansion in our
retail banking activities in Russia. We will be rolling out Premier
branches in Moscow and St Petersburg and others at a later date…
This is part of [HSBC’s] global push to reach out to the mass
affluent community.”


The world’s eighth-largest economy

Russia, the world’s eighth-largest economy and Europe’s most
populous nation with 142 million people, is benefitting from
accelerated growth in its consumer banking sector, according to a
report, Scenario 2020, published by Austria’s RZB Group in

It predicts that Russian GDP per capita will rise to 65 percent of
the EU 27 average by 2020; it also predicts that there will be a
further reduction in the overall number of banks, from over 1,000
in 2007 to around 650 by 2020, mainly through M&A activity and
liquidation measures by the central bank (it also warns that the
market may remain highly concentrated, with the biggest three banks
– Sberbank, VTB and Gazprombank – all controlled largely by the

The RZB report estimates that with GDP per capita at purchasing
power parities doubling from €9,890 ($15,600) in 2006 to around
€20,700 in 2020, the degree of financial intermediation (banking
assets as percentage of GDP) should more than double as well – from
around 60 percent of GDP in 2007 to around 130 percent by 2020.
This would correspond to an annual average growth of banking assets
(in rouble terms) of 18.8 percent. In volume terms, this forecast
would imply an increase in total banking assets (in rouble terms)
by more than six times compared with 2007.

Raiffeisen itself became the largest international player in Russia
in November last year when it merged its two Russian banking
operations, Impexbank and Raiffeisenbank Moscow, into one. Other
big international players in the market include Italy’s UniCredit
and the Belgian bancassurer KBC, which last April paid €704 million
for a 92.5 percent stake in Absolut Bank, Russia’s seventh-largest
non-state-owned mortgage lender (see RBI 571).

UniCredit’s recently released full-year 2007 results for its
Russian operations showed an increase in profit before tax of 14
percent, up to €248 million. Consumer loans increased 59 percent
year-on-year to €7.4 billion, as of the end of December 2007, and
customer deposits were up 24.8 percent to €5.7 billion. KBC said
that underlying profit at its Central and Eastern Europe and Russia
unit rose by 45 percent across the year.

Despite the moves by the likes of HSBC and Barclays, the most
significant deal in Russia has to be Société Générale’s (SocGen)
increased stake in Rosbank, confirmed in early February. The French
group has amassed a 50 percent plus one share stake in the
600-branch Rosbank, a bank with 3 million private customers and
60,000 SME clients. The deal gives SocGen access to a network that
covers the entire Russian territory, with a presence in 90 percent
of the nation’s towns with a population greater than 500,000. The
deal adds to SocGen’s existing retail banking and financial
business in the country, which includes BSGV, Delta Credit and
Rusfinance. The bank is currently trying to up its stake in Rosbank
further by offering to buy the stakes of minority

According to SocGen, outstanding deposits at Rosbank grew by 42
percent a year between 2003 and 2006; loans to individuals
increased on average by 90 percent a year.