Another one quitting
British bank Barclays announced its intention to sell its Russian-based Barclays Bank. The company is not the first to close its business in Russia (Barclays Capital, however, is said to continue operation): the crisis prompted other foreign credit institutions to quit the market. Morgan Stanley and Santander consumer finance, for instance, closed their Russian subsidiaries last year.
Foreign banks would leave the Russian market during the 1998 crisis. Citigroup, Credit Suisse, UBS and Morgan Stanley closed some of their offices in Russia at the time because they suffered significant losses while Lehman Brothers, JP Morgan, Goldman Sachs, Merrill Lynch and Nomura quitted the Russian market.
Yet the situation is not that dramatic. According to the central bank, the last year's drop in the number of credit institutions with non-residents' stakes in the equity capital (more than 50%) totaled less than 2% (see the figure).
*the beginning of the year data
**IFS estimates
A slight shrinking of non-residents' presence in the Russian banking market is quite explainable. The problems of their parent companies caused by the crisis forced them to revise their investment strategies. Banks face increasingly more difficulties in reaching a desirable profitability in Russia - tough competition with state-owned credit institutions amid the declining demand for loans (based on the risk/profitability ratio acceptable for banks) have considerably limited banks' earning opportunities in Russia. Russia's banking market growth rates faced a sharp drop compared to the pre-crisis period (asset growth rates totaled 15% in 2010 (IFS estimates) versus 39.2% in 2008). This is a temporary slowdown, however, and it's highly probable that in the near future we will observe a new upsurge of foreign investor activities in Russia's banking sector. As the overall economic situation in the country improves, interest from the side if foreign investors will be growing (though slowly). Besides, improvements in the financial results will enable international credit institutions to further expand their footprint and reboot their businesses in Russia.
By Galina Kovalishina,
head of the Corporate Finance Department
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