Banks specialising in consumer lending are earning impressive returns in Russia, but state and foreign-owned players still dominate the banking sector as a whole.

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The unsecured consumer lending and credit card business is delivering impressive returns in Russia. In total, five of the top 10 banks for return on assets (ROA) in Russia are specialists in consumer lending. A sixth consumer lending bank, Russian Standard, lies at number 11, with a return on assets of 3.51%.

Locally owned Russian Standard effectively founded the sector in Russia in 1999, but consumer credit is now predominantly a business for foreign players, including the US-based GE Money and Hungary’s OTP. The second best performer, Home Credit, is owned by PPF Group, the investment vehicle of Czech entrepreneur Petr Kellner, while Credit Europe Bank is owned by Fiba Group, which was founded by Turkish banking pioneer Husnu Ozyegin. Among the consumer lenders in the top 10 for ROA, only Orient Express Bank is locally owned.

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The other institutions among the top 10 are a diverse group, including US giant Citi – which provides both credit cards for retail clients and cash management for local corporates – and three closely held banks that tend to focus on corporate and investment banking. The notable exception is Sberbank, the only true universal bank among the top 10. The country’s largest bank plays a dominant role in both retail and corporate banking, and its hold on the country’s retail deposit base has provided a cheap source of funding that allows the bank to maintain high margins.

In fact, Sberbank accounted for an extraordinary 58% of the top 10 largest Russian bank profits in 2011, generating more than $12bn. This is a far larger share than either of the two other leading state-owned banks, VTB and Gazprombank. While they may be highly profitable, the consumer lenders remain comparatively small – only Home Credit makes it into the top 10 in terms of the size of its profits.

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