The market share of state-owned banks has grown at the top end of Russia’s banking sector, but private sector consolidation suggests this might be about to change.

russian bank assets

The dominance of Russia’s state-owned banking giants has been growing in recent years. Among Russia’s top 20 banks, which had a total of $737bn in assets between them at the end of 2010, state-owned banks held a 75% share, up from 73% a year earlier. The country’s largest bank, Sberbank, which is 58% owned by the state (with 60% of voting rights), has assets of $283bn, just short of 10 times the size of the largest privately owned bank, Alfa Bank.

In the same period, the share of assets for foreign-owned banks slipped by one percentage point. While Citibank’s Russian subsidiary continued growing, Raiffeisen and Societe Generale’s Rosbank both deleveraged. This trend appeared to continue into 2011, with Barclays, Santander and HSBC all winding down retail banking operations in the country.

Meanwhile, locally owned privately held banks shed 1.3 percentage points in their share of assets. Promsvyazbank, Uralsib and Zenit all contracted, and Russian Standard slipped out of the top 20. The decline in this segment’s share of Tier 1 capital was an even sharper 3.5 percentage points, owing to the collapse of International Industrial Bank, which had been in the top 10 Russian banks by capital.

However, the headline numbers mask the fact that there are some marked success stories in the private sector. Among Russia’s top 100 banks, the 10 fastest movers are all privately owned banks. While some are relatively small regional players with assets of less than $1bn, there are also several important institutions. Bank Rossiya, the fastest mover, already has close ties to state gas giant Gazprom through its ownership of Lider Asset Management – the fund manager spun off from Gazprom’s pension scheme. Bank Rossiya’s management denied rumours in September 2011 that they were bidding for another large private player, Bank St Petersburg.

Otkritie, Nomos and Orient Express Banks have already carried out acquisitions, driving rapid asset growth. The consolidation of major privately owned banks in a sector that is still very fragmented suggests that the growing share of state banking may eventually start to reverse.

russian bank assets table

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