Who says Communism is dead in Russia?
Western banks once saw Russia as a huge undeveloped market. Now some foreign lenders are changing their minds. In the past year, at least six European and U.S. banks have announced plans to cut back or close operations in the country. Morgan Stanley MS sold its local mortgage unit last year, and Spain’s Banco Santander STD exited from consumer banking in December. The U.K.’s Barclays BCS announced in mid-February that it will divest the Russian retail unit it acquired for $745 million in 2008. “Subscale businesses don’t belong in our portfolio,” says Hans-Jörg Rudloff, chairman of Barclays’s investment banking arm.Only 24 percent of households in Russia have bank accounts, according to Credit Suisse CS. While older Russians who saw their savings wiped out in the 1998 crash remain wary of banks, a younger generation is eager for consumer credit to finance purchases of everything from cars to appliances. Russia’s mortgage industry is in its infancy, and the government’s new privatization push will give investment banking a lift.
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Sberbank and VTB, both state-run and Russia’s top two banks by assets, are gaining clout. Sberbank has almost 20,000 retail branches and is plotting a move into investment banking. VTB, once the Soviet foreign trade bank, has more than 530 branches nationwide, and its investment banking unit is the biggest underwriter of bond and equity sales. On Feb. 22, VTB agreed to buy the Moscow government’s shares in Bank of Moscow for $3.5 billion—the biggest acquisition by a lender in the country.
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The bottom line: Russia’s state-owned banks are bulking up, causing bantamweight foreign players to flee the market.
Whenever the Government squeezes out the private market; Business suffer and usually end up leaving or closing up shop. You’d think the Russians would have learned this under Communism. I guess they did not learn their lesson. It is also a lesson that we are learning here in America, when the Government gets involved in private industry, bad things happen. Too bad nobody has showed Obama that; but then again, Obama will not even release his Birth records to the American people — what more can we expect?