Anatoly Motylev, the president of Globexbank, seems to thrive on crises. What started out humbly in 1992 as a clearing house for other banks and serving corporate customers has grown rapidly to become one of the top 10 banks in Russia. It still counts some 150 Russian banks among its customers with a push of over $100m through its accounts, and has more recently expanded in several directions at once.
The 1990s were the days of financial industrial groups with a huge bank at the centre, sucking up all state business and using its funds to speculate against inflation or gamble on the treasury bill market. However, these large banks and the few profitable companies all needed a second tier of smaller banks to perform the real banking.
Globexbank built up a solid corporate customer base and was especially strong in catering to the needs of the insurance sector. Indeed, Mr Motylev’s last job was as deputy chairman of Rosgosstrakh, one of Russia’s largest insurance companies. But, as was the case for several other market leaders, the 1998 financial crisis turned into a golden opportunity as it swept away the competition in one stroke.
“We were lucky to trade out of state bonds in the spring [of 1998], so we actually lost nothing, and managed to overcome the crisis. In fact, we had all our assets in dollars and liabilities in roubles, so we actually benefited from the situation,” says Mr Motylev. “We didn’t default, we didn’t change our name or logo, we didn’t even change our location – our headquarters are still in the same location. I think that reliability is important for our reputation.”
Banks are all growing fast on the back of a booming real economy and competition is becoming increasingly fierce. However, Globexbank is emerging as one of the leaders in the new leaner Russian banking sector.
“In the last few years, we’ve started to grow quite fast. Approximately four years ago, we started retail operations. Many banks that were active in this sector disappeared, and we considered that this was a chance for us to get more from the market, and to exploit the situation,” says Mr Motylev. “We have more than 25 branches in Moscow. We’ve also set up five branches in St Petersburg this year, and will start operations in Nizhny Novgorod soon. We’ve invested around $50m in expanding our retail operations.”
As average incomes have increased five-fold in the last six years, nearly all of Russia’s top banks have been chasing the average man’s savings account. Globexbank was relatively early into the game and, in May, opened the first of five planned branch offices in St Petersburg, a notoriously difficult market to crack. In all, the bank hopes to open a total of 15 branches in Russia’s relatively prosperous Leningrad region and north-west district – which has become a base for foreign and domestic manufacturers – over the next two years.
Network of affiliates
Moscow-based banks may be the strongest in the country and the region the richest, but the sector remains highly fragmented and opening branches is an expensive affair. Globexbank has been building up its presence through a network of affiliates. The bank already has operations in eight of Russia’s regions through acquisitions and partnerships with other banks and hopes to use this strategy to extend to another five regions over this year until all of Russia’s millionki (cities with more than a million inhabitants) are covered. This has created one of Russia’s largest banking groups.
Retail turnover has already doubled over the last year and private deposits continue to climb, despite the general mood of nervousness following the mini-crisis in July. Having already survived one severe crisis, Mr Motylev, who personally owns 98% of the bank, was unperturbed by this summer’s crisis and believes it could even benefit the sector.
“It will definitely lead to consolidation of the banking sector. Larger banks will survive, and smaller banks will need to merge with other banks or have very special niches, or they will be bought up as branches by other banks,” says Mr Motylev.
Banking wasn’t the only business that benefited Globexbank in the aftermath of the 1998 crisis. With hard currency in the accounts, the bank also bought a string of properties in the aftermath of the crisis, such as the prestigious 80,000m2 Novinsky project in the centre of Moscow, and financed its completion.
“It’s one of the best offices in Moscow, in terms of quality and location, and the companies who rent space there include Shell, Glencore and Exxon-Mobil. The Moscow government is a small shareholder in the project, but more than 75% is owned by the bank,” says Mr Motylev.
Since then, the bank has moved into residential and retail developments, cashing in on the post-crisis real-estate boom. The bank has financed a big 150,000m2 residential development outside Moscow’s outer ringroad as well as several retail malls in other regional capitals.
“These kind of malls are a new thing for these cities,” says Mr Motylev. “What is already well-known in Moscow is new for these cities and people spend the whole day there because there is plenty of entertainment.”
But regional shopping centres are small fry compared to the bank’s central role in the Moscow City project – an enormous development under way on the banks of the river at Kievskaya Station, which will be Moscow’s answer to London’s Canary Wharf.
“Last year, real estate was the top performing asset,” says Mr Motylev. “We expect some slow-down, but it’s still doing very well. How much it returns depends on the particular deal. For us to be involved in a deal, it should return at least 25%. The maximum we have got is as much as a 300% return.”
