Foreign banks to stick out Russia crisis for lucrative margins

Пятница, 9 октября 2015 15:58 MSK

By Alexander Winning

MOSCOW Oct 9 (Reuters) - Russia's economic crisis may be pushing foreign banks to trim their exposure, but the country's capacity to generate hefty earnings means it is likely to be a priority market for many in future years.

Although dominated by lenders such as state-controlled Sberbank and VTB, Russia's banking sector has several large, established, foreign players, such as Italy's UniCredit, Austria's Raiffeisen Bank International (RBI), France's Societe Generale, and Citigroup of the United States.

All arrived following the collapse of the Soviet Union and they are now under pressure as the Russian economy slumps in the wake of an oil price slide and Western sanctions over the Ukraine conflict.

But bankers and analysts point to the disproportionately large share of group profit RBI and UniCredit make in Russia as evidence of why it can still be a lucrative place to do business.

"Russia is a market with high margins. Foreign banks are able to pay relatively small amounts on their deposits and charge much higher rates on their loans," said Tom Adshead, chief operating officer at Macro Advisory in Moscow.

At a time Western banks are finding it tougher to increase returns in their home markets due to persistently low interest rates and stiffer regulation, earnings in Russia have become an important contributor to bottom lines for some.

For example, RBI earned about 55 percent of its 326 million euro ($371 million) first-half net profit in Russia, despite only having about 11 percent of its assets in the country.

Russia accounted for 12 percent of UniCredit's 1 billion euro first-half profit even though it only has about 2 percent of its assets in the country.   Продолжение...