Foreign Banks Plan Increase in 2010 Assets

Virtually all major banks with foreign capital reduced their assets in Russia last year, but the majority of their managers say they are planning to end that policy and begin growing their business in 2010.

Of the 15 banks that lost the most in assets last year, nine have foreign owners, said Maxim Osadchy, head of research at BKF-Bank, including three in the top five: Raiffeisen (which lost 66.9 billion rubles in assets), Banque Societe Generale Vostok, or BSGV (64.4 billion rubles), and UniCredit (56.3 billion rubles).

Raiffeisen's drop in assets was linked to a fall in liabilities: Central Bank funds fell by 46.1 billion rubles ($1.5 billion) and funds raised on the interbank market fell by 34.2 billion rubles, Osadchy said. BSGV saw interbank funds drop by 47.5 billion rubles, 13.2 billion rubles less in clients' funds and an 11 billion ruble decline in Central Bank funds, he said.

"Lowering assets amid financial turbulence is a natural process resulting from a policy of strengthening financial institutions through stronger capital requirements figures. Our group's management intentionally took that path," said Mikhail Alekseyev, head of UniCredit's management board.

A Raiffeisen spokesperson declined comment.

On average, foreign banks' Russian assets fell by 20 percent in 2009 because of the drop in business activity on the market, said BSGV chief Pierre-Yves Grimaud. "Our reduction is a result of a stricter credit policy and the lower financial capabilities of our corporate clients," he said.

Absolute Bank's decline in assets was also largely because of corporate clients paying off loans, and the bank significantly reduced its exposure to risky sectors, said deputy director Andrei Larkin. Ahead-of-schedule loan repayment also partially explains the 60 percent drop in assets at Standard Bank, control of which went to Troika Dialog, a spokesperson said.

ING, which saw assets fall by 53.4 billion rubles last year, intentionally reduced its assets in the first half of 2009 as part of the group's crisis strategy, said Alexander Pisaruk, head of the bank's management board. "Among our plans this year is to gradually increase the business and assets," he said.

Grimaud, of BSGV, said he hoped that corporate clients would see their financing needs increase for investment projects, purchases or operating capital.

Deutsche Bank's assets in Russia fell by one-quarter, but managing director Joerg Bongartz called that a "normalization," not a reduction.

Retail banks with foreign capital were the primary ones that saw their business grow in 2009, Osadchy said. Citibank's assets rose by 12.7 percent, while at Home Credit and Finance Bank they rose by 15 percent.