Post Bank is going against the grain with plans to hold a total of 18,000 branches across Russia within two years. The lender is using legacy outlets from its Leto Bank and Russian Post origins to increase its reach, with a low-cost model that mixes ATMs and mobile transactions. Stefanie Linhardt reports.


Post Bank, one of Russia’s youngest banks, has huge ambitions. Based on the model used by Leto Bank (a retail lender established by the country’s second largest bank, VTB, in 2012), Post Bank was launched in January 2016 as a joint venture between VTB Bank and Russian Post. It focuses on attracting mass customers and aims to provide traditional bank services – such as deposit taking, unsecured point-of-sales and credit card loans – through both a large and growing branch network and hi-tech services.

“We are looking to build the best digital bank in the country with the maximum physical reach,” says Georgy Gorshkov, first deputy president and chairman of the board of Post Bank. “Last year we opened about 6000 outlets from Kaliningrad to Lake Baikal, which accounts for about three-quarters of the country’s territory. This year, we are adding the Far East and the north Caucasus, so basically we will cover 100% of the Russian regions. At the same time, we are building a very strong digital platform.”

He adds that the bank is planning to open another 6000 outlets by the end of 2018, to bring its total to about 18,000. A branch network of that scale would easily outnumber any other Russian bank, even the country’s largest lender Sberbank, which has been reducing branches since 2012 and had some 15,000 branches as of year-end 2016 figures.

The branch argument

At a time when real estate is costly and the financial sector is focusing on cost savings, how can such a physical expansion drive be justified? Post Bank’s strategy is to leverage existing outlets of Russian Post to reach potential customers across the country.

For this it employs three different methods: with about 6000 outlets, the lion’s share of its branch network is made up by small post offices without a dedicated Post Bank employee but a trained representative of the post office – by far the most cost-effective option. Some 3000 outlets are within a post office, employing a Post Bank member. Meanwhile, the bank also operates a number of flagship branches (at the moment some 350), which are not related to post offices – some of which are rebranded Leto Bank branches.

“If you go to any big Russian city you see dozens of banks offering credit cards, current accounts, savings accounts,” says Mr Gorshkov. “However, if you go 50 miles from the big cities you see that only one or two banks are present. If you matched that with the share of smartphones used by Russians you see that not everyone is today prepared to go digital only. That is the reason why we are opening these outlets.” Post Bank is hoping to maintain this ratio of outlet types, according to Mr Gorshkov.

The first 18 months

Some 18 months on from its launch, Post Bank has doubled the loan portfolio it inherited from its Leto Bank past to about $2.5bn, while its current and savings accounts have grown 30 times from $50m to $1.5bn. “If we talk about 2017, we are aiming to end the year close to the $3bn mark for our loans portfolio and slightly lower, about $2.5bn, for client money we are managing in current and savings accounts,” says Mr Gorshkov.

One method Post Bank is employing to entice new customers is through attractive interest rates on deposits. Post Bank is an exception in the Russian market in that it offers interest not only on savings accounts but also on current accounts – at a rate of 7% as of August 2017. Despite the initial costs, Post Bank reported profits in its first year – something its shareholders requested from the beginning, according to Mr Gorshkov – of Rbs1.2bn ($20.2m). Post Bank already has some financial backing, but by 2020 it aims to be a significant funding contributor to its shareholders.

The key profit drivers in 2016 were a combination of scale and high growth in the business, backed by the bank’s low-cost model, according to Mr Gorshkov, as well as a “good model of credit risk”. This was, on the one hand, based on the general improvement in the Russian market, and on the other on Post Bank’s “innovative platform”.

“We operate the whole cash cycle through ATMs – our customers can withdraw cash from ATMs, they can deposit through ATMs, they can do payments via ATMs, so our staff members never touch cash,” says Mr Gorshkov. The bank also runs a biometric authentication programme, which means that every customer is photographed, allowing the bank to identify its customers at a later stage.

This hybrid of traditional and hi-tech banking underlines the bank’s potential to attract new clients across all generations, in defiance of a wider trend towards fewer branches. Whether Post Bank’s strategy proves the right one remains to be seen.  


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