Restore and increase investments have been only to a few, the rest sold or closed business with a loss
Foreign banks, which got rid of its subsidiary credit organizations in Russia in the current crisis, has lost about $1.9 billion And the losses suffered not only from the elimination of business in the country, but also from the sale. Such data leads the National rating Agency (NRA), which analyzed the transactions and liquidation events over the past few years. The “news” first got acquainted with the results of the study.
During the crisis, many foreign credit institutions have begun to curtail their business in Russia, which is actively developed since the mid “zero”. According to the Central Bank, if on 1 January 2012 the country had 77 banks with the absolute foreign capital, on January 1, 2016, such associations remained 68. Non-residents displaced business in our country for different reasons. As recalled by the head of Department of the analysis of financial sector NRA Karina Artemieva, Exodus of foreign banks from Russia began immediately after the assessment of the consequences of the crisis for the Russian economy and financial system.
— The basic and the most high-profile transaction involving the sale of subsidiary banks of the recently established Western players began in 2010, when it became clear that after 2008, the Russian economy is not gaining the pre-crisis growth rates, and gradually approaching stagnation, she said.
If after the default of 1998, Russia first grew 6.5%, and in 2000 by as much as 10.5 percent, the growth rate of Russia’s GDP after 2008, began to decline steadily to 4.5% in 2010, 4.3% in 2011, 3.4% in 2012. While oil prices continued to be at a very high level.
— Many Western players realized that their calculations “skimming” with a rapidly growing consumer spending are under threat — said Karina Artemiev.
According to her, in this situation, the process of folding business were forced to start banks, serious overpayments for assets in Russia, enter the Russian market shortly before the 2008 crisis and had not managed to remove the margin from high pre-crisis boom of consumer crediting, as well as those who invested on a short time horizon. By the way, the 2007-th, when many came to Russia, was the most successful it is to exit and lock in profits.
The foreign banks explain their care of a variety of reasons — a change of strategy towards new markets, the tightening of state regulation in Russia. In addition, before the crisis, global banks provide “daughters” of relatively cheap financing, which provides them competitive advantage in the Russian market. During the crisis, the question of the financing subsidiaries for many of them ceased to be a priority.
Deputy Director of “Interfax – CEA” Alexey Buzdalin believes that it’s not so much the profitability of the Russian business, but at a high risk. The expert urges to consider care of foreign banks in the context of optimization of group reporting in connection with the entry into force of the high requirements for capital adequacy “Basel-3”.
— Credit organizations have optimized their activities not only in Russia but also in other countries of Eastern Europe to free up capital to be used to cover risks, for more effective development in their jurisdictions, — says Alexei Buzdalin.
Indeed, the departure from Russia quite successful in the Russian market GE Money Bank to a greater extent due to external factors, and not the Russian crisis.
— A new global strategy GE after the crisis shifted to focus activities on its manufacturing segment, which he wanted to bring to 70% of the profits of the entire Corporation, and in this context of the financial business of GE in Russia, however, as in many other countries, has fallen victim to a new global strategy — emphasizes Karina Artemyeva from the NRA.
In this case, I’m sure the NRA representative, the sanctions standoff, which, it would seem, on the surface, have had on the process of withdrawal of foreign banks from Russia any influence: most of the players took the decision to leave before the imposition of sanctions, and those players that took the decision after the spring of 2014, most of them were guided by economic considerations. Sanctions, however, if you look on the other hand, increase the risks from activities in the country.
However, very few of the departing managed to do it without losses. Of the 15 major transactions, which analyzed the NRA, success has been achieved only three. Greek Hellenic Bank Ltd , which at the beginning of 2009 invested $10.5 million in the creation of the Russian “daughter”, was able in June 2014 to sell its group of Russian investors for $33.1 million Spanish Banco Santander S. A. of Spain, which was acquired in early 2007, Extrobank for $55 million, sold already converted the Santander consumer Bank “Orient Express” for $75 million More fortunate American General Electric Customer Finance (GECF), which was sold in February 2014 Sovcombank GE Money Bank (formerly DeltaBank) for $158,5 million, earned $58.5 million
The greatest losses were registered by the Belgian KBC Group, which is the sale of Absolut Bank NPF “Welfare” has lost $691 million, Barclays Bank PLC ($625 million), Bank of Cyprus ($443,8 million), which is for the purchase of 80% of Uniastrum Bank in November 2008, spent $450 million, and sales from entrepreneur and public activist Artyom Avetisyan in 2015 was able to gain only $6.2 million
Fully their investments have lost four Bank Investments Limited IPF ($5.9 million), Rabobank ($44.4 million), Svenska Handelsbanken ($53.4 million), Swedbank ($3.4 million), which are unable to find a buyer and just eliminated their Russian units.
In total, as already mentioned, the aliens have lost from the sale or liquidation of the subsidiaries in Russia for at least $1.9 billion (excluding funds spent on business development and operations. However, Alexey Buzdalin sure that it is important to perform and how many won from banks to optimize the use of the released capital for business development in their jurisdictions.
