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Successful in its own right

Gazprombank has broken away from giant parent Gazprom to diversify and build on its foundations, its chief financial officer Alexander Sobol tells Ben Aris.
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Russia’s banking sector has been lifted by the rising tide of strong economic growth, but Gazprombank has been setting an even faster pace. The third largest bank in Russia, it was set up in the dying days of the Soviet Union and celebrates its 15th birthday this year.

Russia’s most successful banks are all associated with big industrial groups. So it comes as no surprise, perhaps, that Gazprombank is a leader, given that it is 100% owned by the state gas monopoly, Gazprom, which is also Russia’s largest company. However, Gazprombank has been a pioneer in using its solid foundation of Gazprom business to diversify its operations and become a successful commercial bank in its own right.

Profits double

“Our assets were up 60% over the past year to more than $10bn and our profit after taxation doubled to $402m,” says Alexander Sobol, Gazprombank’s chief financial officer. “We are third in Russia in terms of assets and profits, behind state-owned banks Sberbank and Vneshtorgbank, making us the largest non-state owned bank.”

As The Banker went to press, the state had agreed to buy 10.74% of Gazprom for $7.15bn, which would bring its direct holding in the gas company up to a majority stake, and move the bank closer to the government.

Gazprom remains one of the major customers for Gazprombank, which, aware of the dangers of putting all its eggs in one basket, has been diversifying its assets.

“Concentration risk is one of the main dangers for us,” says Sobol. “Five years ago, 93% of our loan portfolio was connected to Gazprom, but at the end of 2004, the concentration was 35%. It was a great achievement, but not easy. We didn’t decrease the volume of business with Gazprom but we increased our business with other branches and companies.”

Gazprombank concentrates on large corporate clients and caters to the needs of companies from across the industrial spectrum, ranging from oil producers and large exporters of raw materials to the defence sector and power generators.

“Our corporate products are based on our main competitive advantages, such as high ratings from Moody’s, which have given us an investment grade rating – only a handful of banks enjoy this advantage. This has given us the possibility to raise cheaper money from the West,” says Mr Sobol.

This cheap money is driving a wedge between the large and small Russian banks as the larger players can undercut their smaller rivals and offer longer maturities on loans. Smaller banks suffer from a serious mismatch because they are forced to borrow short-term money to finance long-term projects.

“The maturity of our last bond was five years and the maturity of our last syndication was three years at Libor plus 1.8%, which we used to fund investment projects of five to seven years. We don’t suffer from a serious mismatch between assets and liabilities,” explains Mr Sobol.

Building on experience

The bank has also been beefing up its corporate finance and investment department to build on its experience of handling the multibillion-dollar investment projects of its parent. More recently, it has plunged into the retail banking sector. Gazprombank already enjoys the fourth largest depositor base in Russia and is the second largest issuer of credit cards. The most important consumer product is car loans, but the bank is also hoping to be one of the handful of players that will dominate the nascent mortgage market.

The bank operates 32 branches across the country but, together with its seven affiliate banks, (all related to the gas industry), it has 400 branches, giving it one of the largest distribution networks in Russia.

“We have a very strong starting position in retail. We have a very large number of clients that are traditionally connected to Gazprombank and the bank has a very strong brand,” says Mr Sobol. “So we have a good growth potential and the product market is increasing very fast.”

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Read more about:  Central & Eastern Europe , Russia