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Monday, Mar. 18, 2002. Page 9
While the government continues to drag its feet on banking reform, more foreign banks are entering the market.
Russian subsidiaries are being opened by a further four fully foreign-owned banks in an effort to take advantage of the country's fragile yet developing banking market.
Natexis Banques Populaires, one of France's top five banks, became the 24th foreign bank operating locally when it opened its first subsidiary last month. The bank said it is focused on working with Russian companies in the raw materials and energy sectors.
Although still fragile, "the Russian banking sector in general is becoming healthier," said Rodolphe Evangelisti, board chairman of NBP's Russian subsidiary. "I think that there is more room for other foreign banks to come to Russia."
Other bankers and experts agree, saying that although major international banks are already represented in Russia -- many of which already had representative offices in the country -- further expansion is on the way.
NBP opened its local subsidiary on Feb. 26 with a charter capital of $13 million, becoming the third French bank to receive a banking license in Russia after Credit Lyonnais Rusbank and Societe Generale Vostok. NBP has been operating in Russia since 1997 through a representative office.
"For us, this decision was logical because we have already built good relations with Russia's corporations and we feel that the financial sector is much more stable now," Evangelisti said Friday. "We feel it is a good time to expand in Russia and be closer to the market."
One of the first fully foreign-owned banks to enter Russia was Banque National de Paris, which opened a representative office decades ago. Under an agreement with Germany's Dresdner Bank, the two operated in Central and Eastern Europe, including Russia, under the joint name BNP-Dresdner.
Last year, after BNP merged with French bank Paribas, the alliance with Dresdner broke up and their offices in Moscow and St. Petersburg began operating under the name Dresdner. Now BNP-Paribas wants to reassert itself.
Bank Melli Iran, Iran's largest state-owned bank, also expects to begin operations here in the next few months, making it the first Iranian bank in Russia.
"We hope to start operations [soon], but it is hard to tell for sure," said Farhad Saidi, who is in charge of opening the subsidiary.
"Our move is a sign of increased political cooperation between Russia and Iran," he said.
British- and South African-owned Standard Bank London is planning to apply for a banking license with the Central Bank in the near future, industry sources said.
The move would be logical considering the bank's high level of activity on the Russian market, mainly through syndicated loans, analysts said. The bank declined to comment Friday.
"It's the right step for Standard Bank because it will allow i
t to keep accounts of those Russian clients that have already obtained loans from them or will do so in the future," said Mikhail Matovnikov, deputy director of the Interfax Rating Agency. "It means the bank will keep at least part of its profits, which obviously makes economic sense."
Standard Bank was one of the most active organizers and participants in syndicated loans to Russian corporations and banks in 2001 and has already had a busy 2002. The bank participated in a $250 million loan to Sibneft in January, organized by Schroeder Salomon Smith Barney. It also syndicated a $20 million loan for Alfa Bank and a $17 million loan for NOMOS Bank.
"There is some room left for foreign banks, but I won't say that it is very large," Matovnikov said, adding that much will depend on the type of lending policy the banks adopt.
"If they decide to attract money from their head offices and lend them to Russian clients, the potential profits can be very high, as interest rates in the West are still considerably lower," Matovnikov said. "Yet, if foreign banks decide to build traditional operations within the scope of their own resources, they would have to work hard."
A greater boost for the banking sector could come from lending from large corporations.
If credit departments of large international corporations began launching their activities here, that would have a more considerable affect on Russia, Matovnikov said.
"The capital departments of General Electric, General Motors and Ford traditionally provide different financial schemes, including consumer credits and leasing, and earn as much as producing companies," he said. "General Electric, for example, is already working in Hungary, Poland and the Czech Republic, but is not yet interested in Russia."