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Rosbank set to take its place among Russia's heavyweights

The consolidation of Société Générale's Russian subsidiaries will create a universal bank with firepower, its chief executive Vladimir Golubkov explains.
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Rosbank set to take its place among Russia's heavyweightsRosbank and BSGV will be merged with Rusfinance and DeltaCredit

The consolidation of Société Générale’s Russian subsidiaries – Rosbank, BSGV (Banque Société Générale Vostok), Rusfinance and DeltaCredit – will make it one of the largest foreign banks in Russia and place it in the upper echelons of Russian bank rankings by most criteria.

Rosbank and BSGV will be merged with Rusfinance as a consumer credit subsidiary and DeltaCredit as a mortgage subsidiary. With 650 branches in 340 cities and towns and plans to add 300 more by 2015, the consolidated Rosbank will have a strong retail presence – although still trailing state-owned Sberbank’s 20,000 branch network by a long way.

“As a result we will have a bank that ranks fifth in the Russian bank placing by credit portfolio," says Rosbank’s CEO Vladimir Golubkov. “We will be higher than any international bank in Russia. SG [Société Générale] is the biggest investor in the Russian financial sector in Russia, with a clear strategy to make it the group’s second market after France by 2015. Twenty percent of SG’s total staff is based in Russia.”

SocGén's big share

By the end of the consolidation process, the share of Société Générale in the consolidated group will be 81.5%, with the remaining 18.5% split between VTB Capital, Interros and others.

A Société Générale press release on the 2010 fourth-quarter financial results says the following about the Russian operations: “In Russia, at the same time as creating a unified management team and initiating legal consolidation in 2010, the group continued with the implementation of measures to improve operating efficiency and risk control. The contribution of group net income amounted to €13m in Q4 2010, confirming the financial recovery of the Russian operations.

"Outstanding loans and deposits by individuals experienced a sharp increase of 13.4% and 6%, respectively, year on year. In 2011, commercial activity is expected to benefit from the encouraging macroeconomic outlook and will be driven by a programme to optimise the sales set-up and the exploitation of synergies between the group’s entities.”

Mr Golubkov says that, as a result of measures to restrict credit during the crisis, the bank is liquid and has capacity to expand as the economy improves. The bank will be focusing on all areas of the market but has a head start in retail, as Rosbank was one of the first movers in Russia’s nascent market back when many rivals were concentrating on serving only blue-chip corporates.

“We plan to develop our universal banking model, not only for corporates and retail, but also for all types of clients with full sets of products. For small and medium-sized enterprises we want to transform the bank from being product-oriented to client-oriented,” says Mr Golubkov.

“We are going to reorganise the branch network, and have already done this in the first 50 outlets. It will all be done over the next two years. This includes refurbishing the branches, changing the way they operate and rebranding.”

Retail challenge

Retail banking is still a challenge in Russia, with a lack of long-term funding for mortgages and little client data to make good lending decisions. But Rosbank has more data than most banks; it has made an incredible 8 million retail loans since 2003/04. One solution is payroll loans made through companies to employees, with repayments taken directly out of salaries.

There are also disputes with officials at Rospotrebnadzor, a federal agency which champions consumer rights, particularly on the question of commissions. “[It doesn't] allow us to take commissions," says Mr Golubkov. "[It thinks that] if you are granting the loan to individuals you can’t take commissions but have to include everything in the interest rate. We have many disputes with it.”

When a Russian bank pushes consumers for repayment they often go to the protection agency. “It’s not the law that is bad, it’s a fight between consumer rights protection and the banks,” adds Mr Golubkov.

Even so, there is huge growth potential in Russia and the bank’s strategy is to use mortgage and car loans to build relationships with customers, to whom it can cross-sell other products. On the service side the bank has three call centres – in Moscow, Vladivostock and Krasnoyarsk – which are used both for selling and debt collection.

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