State-owned Sberbank (Сбербанк России) is Russia’s largest bank. As of January 2011 Sberbank’s assets accounted for over a third of Russia’s banking sector (27 percent) and 26 percent of banking capital. Sberbank is Russia’s largest lender, issuing approximately one third of all loans in the country to both retail and corporate clients. Sberbank posted 2010 profits of 181.6 billion roubles ($6.4 billion).
State-owned VTB (ВТБ) is Russia’s second biggest bank after Sberbank. Formerly called Vneshtorgbank, it is traded on Russia’s RTS and MICEX exchanges and the London Stock Exchange. VTB was founded in 1990, is headquartered in St. Petersburg and headed by Andrei Kostin.
Bank of Moscow is Russia’s fifth largest bank by assets, which totalled 958 billion rubles in October 2010. The bank’s gross loan portfolio is estimated at 669 billion rubles. The bank has 380 offices throughout Russia, 139 of which are in Moscow or the Moscow region.
Russia’s Central Bank (Центральный банк Российской Федерации) was originally established in 1860. It was reborn following the collapse of the Soviet Union in 1990, when it replaced the Russian Republic Bank of the State Bank of the Soviet Union. It is headquartered on Nieglinnaya Street in Moscow and run by Sergei Ignatyev.
The Russian banking sector includes over 900 banks, but is dominated by state-owned giants Sberbank and VTB, and regulator the Russian Central Bank.
Russia’s biggest banks by asset are: Sberbank, VTB, Gazprombank, Rosselkhozbank, Bank of Moscow, VTB 24, Alfabank, Unicredit Bank, Raiffeisenbank and Promsvyazbank.
In late May 2011 the Central Bank predicted that the number of banks registered in Russia would fall by up to 20 banks by the end of the year. 944 banks currently operate in Russia. The bank is basing this prediction on the strong likelihood of mergers in the banking sector and a hike in capital requirements to 180 million rubles, due to come into effect on January 1 2012. The Central Bank estimates that 164 of the countries banks would currently fail to meet that requirement.
Russia’s banking sector developed rapidly in the second half of the 19th century, but was nationalized following the October Revolution, to create the three large banks which would last throughout the Soviet period: The Soviet State Bank; Vneshtorgbank; and Stroybank. Commercial banks were banned under communism, and none operated in the Soviet Union until 1988, when the Patent Cooperative Bank opened in Leningrad (now St. Petersburg). This marked the beginning of a huge resurgence of commercial banking, and when the Soviet Union collapsed this trend continued, as the ensuing uncertainty led to an explosion of unstable and sometimes criminal banks. By 1997 there were over 2,000 banks operating in the Russian Federation.
The market changed significantly with the crash of 1998, when Russia’s oil-based economy was hit hard by declining international commodity prices. The situation was compounded by the cost of the First Chechen War, the fiscal deficit and high foreign currency to ruble exchange rates. The crisis brought down the Chernomyrdin government and swept away many of Russia’s banks, two of the more high-profile of which were Inkombank and Oneximbank.
The majority of Russia’s banks belong to the Deposit Security Agency, which was established in 2004 to protect bank depositors from exposure to banks that are unable to pay their debts.
Foreign banks entering the Russian market have had mixed fortunes. In 2011 several foreign banks announced plans to exit Russia or scale down their business, including Morgan Stanley, Banco Santander, HSBC and Barclays. Many have attributed this to the strength of state-owned banks Sberbank and VTB, which control much of the market. Success stories include Societe Generale, UniCredit and Raiffeissenbank.
The Russian banking sector has huge potential for growth, with Credit Suisse estimating that as little as 24 percent of Russians have bank accounts. Memories of the 1998 crash are a barrier for the older generation, but younger people are a strong target audience for a range of services, from online banking to loans to buy houses and cars.