Russian Standard Bank, Russia’s top consumer lender, has been the highest profile institution to feel the effects of the fall-out from the global credit crisis on the Russian banking sector.
The bank, owned by Russian vodka-to-banking billionaire Roustam Tariko, was a pioneer in the country’s consumer lending sector, setting up a successful credit card and retail loan business in a model copied widely by other Russian banks.
It achieved record profits of $550m in 2006 – a leap of more than 140 per cent on the previous year – and ranks as Russia’s 15th biggest bank. With more than 20m clients, the institution has won 75 per cent of the country’s credit card market and 40 per cent of the consumer credit market.
But with more than 50 per cent of its funding from international debt markets, it was one of the first Russian financial institutions to feel the squeeze from the global credit crisis.
Last year, Dmitry Levin, the bank’s chief executive, said he expected profits to drop 28 per cent to $400m in 2007. The bank was forced temporarily to curb cash loans and mortgages. But at the time, it insisted they were marginal products, while its core businesses – credit cards and point-of-sale loans – were growing as expected.
The bank redeemed a $300m eurobond last September but since then Mr Levin has said it will refrain from issuing eurobonds in 2008.
“The eurobond market is closed. If it opens it will be too expensive,” he said at an investment conference in January. “The bank plans to raise funds through bilateral deals, securitisation and retail deposits.” Mr Levin said the bank was on track, however, to boost profits by 25 per cent to $500m in 2008, compared with the revised profit expectations for 2007. He said it planned two securitisation deals: one of its credit cards portfolio worth $400m to $500m and another of its consumer loans portfolio worth $100m-$200m. Last December, it successfully raised $500m in asset-backed securities despite poor credit market conditions.
Mr Levin has said the bank is staggering its debt payments so as to minimise the risks while hoarding extra resources to guard against a credit squeeze.
In the meantime, the bank has been ratcheting up plans to create a more secure funding base by increasing the number of retail deposits. These are expected to more than double – to reach $800m by the end of this year – compared with $300m. Just 5 per cent of its financing came from private deposits at the end of 2007. But Mr Levin told the Financial Times that the bank plans to increase this to 20 to 25 per cent by 2011.
Analysts have been slashing growth forecasts for the Russian banking sector as access to international funding dries up. But Troika Dialog still expects overall growth in the sector to be around 35 per cent – down from 44 per cent last year. Alfa Bank, meanwhile, expects banking growth to slow to 25 per cent. Most analysts predict growth will be hardest hit in the consumer lending sector.
But foreign banks are still eyeing Russian banking as one of the fastest growing sectors in the world. Barclays Bank bought Expobank, a mid-sized bank with retail and commercial operations, for $745m in March.
