Rattled elsewhere, banks bet on Russia, a known risk
By Catrina Stewart Moscow
Times
MOSCOW: In a world of sudden debt write-downs and jettisoned chief executives,
leading foreign lenders are finding it can be better to bank on the Russian risk you know than the
subprime exposure you don't.
Indeed, for some of them, the contrast with Russia has never
seemed greater, where the prospects for growth - organic or acquisition-driven - stand in welcome relief
to the turmoil back in the United States.
But the window of opportunity for new entrants to
the market could be closing. While Russian banks are seen as more attractive than ever before, the number
of banks up for grabs is limited, while those looking to go it alone through organic growth may have
missed the boat, foreign lenders say.
Citibank, whose U.S. parent, Citigroup, found itself
minus $XX billion in write-downs and its chief executive, in rapid succession, has built up a substantial
growth platform in Russia during its 14-year presence here, and it is pursuing organic expansion.
Mark Robinson, chief executive of Citibank Russia, said that new entrants now had little choice
but to consider an acquisition.
"If I was coming into Russia now, I would say 'I don't think I
have any choice,' " he said. "They need to get a critical mass of people."
But Robinson noted
that acquisition opportunities were confined to relatively few of the larger banks.
"After the
top 30, the banks drop off very quickly in terms of size," he said. "We can grow faster by putting money
into an organic strategy."
Johann Jonach, chief executive of Raiffeisenbank in Russia, agreed
that going it alone was more difficult now. "If you want to become a universal bank and a more
significant player" in Russia, he said, "I think it is too late to start from scratch."
Analysts say the route to take depends on how quickly the foreign banks want to grow here. If they have
the luxury of time, organic growth can be a preferable strategy to acquisitions.
"It's always
a trade-off," said Mikhail Galkin, a banking analyst at MDM Bank in Moscow. "When you buy a bank, you buy
market share, clients and relationships. On the other hand, you have to pay a high price, which varied
from three to five times book value prior to the global turmoil. There is also the issue of integration,
which can be a nightmare."
Raiffeisen, based in Vienna, acquired Impexbank, and is still
integrating the smaller player into its structure. But on the plus side, the Austrian lender boasted at
the time that Impexbank had saved it four years of organic growth.
"International banks are
keen on growing organically because their biggest cost is setting up," said Mark Rubinstein, banking
analyst at Metropol. "Once they have all that in place, it is not that expensive to grow."
Russia has seen several new entrants in the past 18 months, and central bank figures put foreign
ownership in the sector at 20 percent, a figure that includes the portfolio investors who hold shares in
state-owned Sberbank and VTB following their initial public offerings. Strip them away, and analysts say
the real figure is around 15 percent.
Natalya Orlova, banking analyst at Alfa Bank, said that
given the continuing expected domination of the sector by state lenders, foreign ownership of banking
assets would only increase to 20 percent to 25 percent within the next five years.
Orlova also
said merger and acquisition activity would stall until the situation in the sector became clearer and
growth figures more predictable.
KBC, of Belgium, another bank pursuing acquisitions in
Eastern Europe, has led the recent charge in Russia, paying $1 billion to acquire the mid-size lender
Absolut Bank.
Analysts said, however, that foreign buyers were overpaying for their assets.
KBC bought Absolut at a "very expensive" 3.8 times book value, Rubinstein said.
Some analysts
said valuations had ceased to be the stumbling block for potential buyers, as the Russian market was too
big to ignore and one of the few countries that still offers the chance to become a significant
player.
"I think the valuation is much less of an issue than the strategic importance of
buying a bank in Russia," said Bob Kommers, banking analyst at UBS. "More important is the size of the
market and the fact that it is fragmented, which means that it is possible for all new entrants to
achieve a meaningful position."
Analysts have suggested that tougher market conditions in the
wake of the U.S. subprime crisis could present opportunities. Troika Dialog acquired an 8 percent stake
in Ursa Bank, a Siberian regional lender with a high exposure to overseas debt markets, in what some saw
as a move to take advantage of a funding shortfall.
"Any bank that is not state-controlled in
the top 20 is potentially for sale. The problems in the international credit markets may accelerate the
need for funding from strategic buyers rather than from bond markets," Kommers said.
For some
banks, however, it could be the only way in. Since getting a banking license here can take one to two
years, buying an "entry ticket" through a small acquisition and then pursuing organic growth can look
more attractive, Orlova said.
The global banking giant HSBC, which obtained its retail banking
license in May 2007, is one of the few new entrants seeking to grow here without acquisitions.
"If anyone can, they can," Kommers said.
Of course, there can also be unpleasant
post-acquisition surprises.
Commerzbank, the German lender, was reminded of the challenges of
doing business in Russia when Promsvyazbank, in which it holds a 15 percent stake, was raided Oct.
31.2007
Commerzbank bought a stake from the Ananyev brothers in 2006, and had the option to
increase its stake at the start of this year. But talks then did not result in a deal. A source close to
the German lender said that the two parties had failed to agree on a price.
Promsvyazbank is
seeking to list in London, the business daily Vedomosti reported recently, and one banker speculated in
the newspaper that Commerzbank might sell all or part of its stake.
"We are open to all
options," said Beate Schlosser, a spokeswoman for Commerzbank. "But we think that our stake in
Promsvyazbank is a good investment."
The risks of doing business here are understood by more
and more companies. Russian banks, particularly those with a regional reach, remain extremely attractive,
and the country is still underbanked.
"The banking sector is still in its infancy here," said
Peter Halloran, president of the Pharos Fund. "The consumer in Russia is still not leveraged, and
mortgages are 1 percent of GDP."
But the easier growth seen in the last couple of years will
soon become a thing of the past, as a combination of less accessible overseas funding and a natural
correction of the market kick in, analysts said.
"Growth will come down," (Anmerk:~40%
2007,it is expected to start to slow by 2 to 5 percent per year) Jonach, at Raiffeisen, said. "This
is partly because of the changed situation in financial markets"
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RIBH 23: Free Bully - Back on Track!? 
Hansl(11)
Raiffeisen Bank International 
SieurKolou74(340)
j77(14)
! Interessant finde ich vor
allem auch Stepic Aussagen, wie unterversorgt noch immer viele Staaten sind (12 Mio Polen noch immer kein
Konto!).
BBK_06(7)
j77(14)
Wir werden sehen...
