Friday, January 13, 2012

Putin's Favorite State Owned Banks

Bankers and Russia. Specifically State owned banks expanding and controlling the majority of the market. Is this the "problem" with Russia?
The problem requiring destabilization?
Does the problem boil down to private bankers? And their ability to plunder with impunity being impeded?



Picture from linked article

Interesting article from Bloomberg : Vladimir Putin's Favorite Bankers

Russian authorities are building up the investment banking arms of state-run Sberbank and VTB Group, ranked the country’s biggest and second-biggest lenders. They have blessed or orchestrated a string of mergers and acquisitions, including Sberbank’s $1 billion takeover of brokerage Troika Dialog, to be completed in February. VTB last year bought Bank of Moscow and TransCreditBank. The deals give state-owned banks more than 60 percent of the domestic market for underwriting corporate bonds, up from 34 percent in 2010, according to data compiled by Bloomberg.


State owned banks getting a bigger piece of the pie then private banks?

The government-run banks are gaining market share by keeping fees low, says Kraus, the asset manager: “They don’t have to make money on every deal.” That suits local companies fine. “We like to get the lowest rates possible for financing, so it’s better for Russian issuers that Sberbank and Russian banks become more sophisticated,” says Joshua Tulgan, director of corporate finance for Mobile TeleSystems, the No. 1 wireless operator. The company has had a 100 billion ruble ($3.15 billion) credit line with Sberbank since 2010 and expects to be offered a broader array of services following the Troika integration.


Government run banks gaining market share, keeping fees low and being ok with not making money on every deal?
Does this leave the foreign banks, having to partner with the state banks?



Three foreign bankers in Moscow, who asked not to be identified to avoid jeopardizing their firms, say the only way they can win business these days is by teaming up with VTB Capital on deals. “The international banks were cherry-picking the larger deals with higher margins,” says Todd Berman, whom Troika Dialog hired away from Bank of America last year to co-head investment banking. “They won’t be able to do that going forward.”


Bottom Line according to this article:

With the Kremlin’s help, state-owned banks have locked up 60 percent of Russia’s corporate debt underwriting market.

Interesting to note

It is claimed in the article this push for state bank expansion could not come at a better time, what with all the private banks in a mess.

The Kremlin’s push to create national champions in banking could not be better timed.

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