Rich Russian banks to buy European rivals

[North Pole Resident]

Remember how Russia looked like in the early 1990s after the collapse of the Soviet Union? Sure you do...

Empty food stores at the end of the Soviet era and military coups and wars in almost every former Soviet republic was the reality of the post-Soviet time...


http://www.axisglobe.com/Image/2005/07/05/belarus/211_2_m.jpg

http://images.encarta.msn.com/xrefmedia/sharemed/targets/images/pho/t628/T628776A.jpg

[North Pole Resident]

Well, the situation has changed.
How are we doing now?...

Rich Russian banks to buy European rivals

http://www.usrccne.org/img/photo/sberbanktvs.jpg

Russia's Sberbank


http://russiatoday.ru/media/news/a/4815a71702c44.jpg

VIDEO - http://russiatoday.ru/business/news/24055/video

The purchase of major EU bank, B.M.P.S. by a Russian counterpart could mark the start of a shopping spree by the country’s cash-rich banks.
On Wednesday influential business daily Milano Finanza reported that a Russian consortium is eyeing the French and Belgian operations of Banca Monte dei Paschi di Siena SpA.

Observers believe only VTB or Sberbank has the resources to buy the assets put up for sale by the Italian major.

Experts think cash-rich Russian banks will not be able to resist the temptation to purchase European banks. The current credit crisis provides all the conditions for such deals: EU banks have become relatively cheap, while Russia's banks are full of cash.
However, some banking analysts do not see the logic for Russian banks to buy abroad. “I think the priority for any Russian bank’s management must be first to focus on the domestic market,” an expert from global investment bank Lehman Brothers said.

http://russiatoday.ru/business/news/24055

[North Pole Resident]

I found an interesting comment on democracyforums.com:

Thread: UK Bank Crisis Continues!


It is really tragic for banks that their latest problems are more political than economic or financial. As long as official London follows the directions given by our overseas politicians, the crisis in our banking sector will become stronger! Such dangerous tendency in Brown’s policy even in comparison with Blair’s times has led to very great job losses in this country. See for yourself! According to estimates from London’s Center for Economics and Business Research the dismissals at London-based HBOS Plc, for instance, have come up to 9,160 jobs. It is 66 % of this bank’s workforce! Moreover, in 2008 and 2009 it is expected we will suffer 19,225 finance job reductions. That compares with 15,340 jobs from 2000 to 2002! One more reason of crisis in UK is, in my view, our refusal from entry into “Euro zone”, although such step of our present authorities will greatly help us to overcome most of our economic difficulties. But it is obvious that our US friends are not interested in it at all and they will certainly block any attempts of doing it during at least Brown’s activity!

[ciaranxavier]

this seems to say they are getting themselves in trouble. uh oh.

Now Russia's banks may be in trouble

Russian Banks 'Borrowed Too Heavily'

By Catherine Belton
Financial Times, London
Thursday, August 23, 2007

http://www.ft.com/cms/s/0/4a609028-519f-11dc-8779-0000779fd2ac.html

MOSCOW -- Russian banks have borrowed too heavily on international markets, Russia's top bank supervisor warned on Thursday, raising potential risks for the country's consumer lending boom amid a global credit crunch.

Many Russian banks "have stuffed their vaults to the maximum with loans in foreign currencies," said Gennady Melikyan, first deputy chairman of Russia's central bank. "They could face certain difficulties" if the dollar continued to strengthen. But, he added, "We have about five times more [reserves] than we need to ensure the stability of our monetary system."

His remarks were made at a banking conference and reported by Russian news agencies.

Russian bank borrowing on international markets has risen rapidly to total $110 billion as of April 1 this year -- more than double the level of the previous year.

Overall foreign borrowing by the Russian banking system stands at 15 per cent of total assets, far lower than debt levels in other emerging markets. But several of Russia's top consumer lenders have raised more than 60 per cent of financing on international capital markets, while lending to their customers in roubles. They risk currency mismatches as the dollar strengthens. Mr Melikyan's remarks were made as Russia's financial system faces the first test of its resilience to external shocks, with foreign investors fleeing its money markets to seek safer havens in US Treasuries.

Russia's economy was reckoned a safe place to invest because of high oil revenues that have helped fill central bank reserves to record levels. But the lifting of capital controls last year and increasing international borrowing by Russian companies have left it vulnerable to the global market turmoil.

The central bank was forced to pump a record 169.7 billion rubles ($6.6 billion) into the banking system on Thursday as banks faced monthly tax payments and an exodus by foreign investors. "The situation is getting worse and worse," said Alexei Yu, a trader at the Moscow brokerage Aton. "There is still a long queue to get out of this market."

Russia's central bank on Thursday reported the country's hard currency reserves fell by $5.5 billion this week to $414.7 billion -- the steepest fall this year -- after the central bank was forced to sell as much as $4 billion this week to halt a selloff of the rouble.

"If this continues for another three to four months, we will be in a full-blown crisis," Mr Yu said. Most traders and analysts reckon the liquidity crunch will last until at least the month's end while monthly tax payments continue.

Russian Standard bank, Russia's main consumer lender, has faced scrutiny after complaints about double-digit commissions it has charged on unsecured loans. Russian prosecutors have ordered it to scrap the commissions -- a decision the bank says it had already taken.

It is one of the Russian banking sector's biggest foreign borrowers with more than 60 per cent of its financing from international markets, while just 5 per cent comes from private deposits.

http://www.gata.org/node/5410

[North Pole Resident]

Russians Withdrew $55 Bill. from European Banks

http://www.kommersant.com/photo/512/News/2008/06/18//KMO_088197_60957_1m.jpg

Russian clients withdrew a record $55 billion from their European bank accounts in the fourth quarter of last year. Vedomosti newspaper writes that that is the largest outflow of Russian funds in the last five years. According to the Bank for International Settlements, that was the first year since 2003 that clients from Eastern Europe withdrew funds rather than adding to their accounts.
Access to international loans has become harder for the majority of Russian companies due to the credit crisis. Therefore, Russian companies rerouted funds from foreign accounts to pay for foreign debts or for other purposes. Russian investors may have transferred their funds to more promising markets. Also, the share of the Central Bank’s currency reserves in foreign banks was reduced in the fourth quarter of last year by more than $17 billion.

Of the $390 billion in bad debt written off by credit organizations since the beginning of last year, about $200 billion of that amount came from European banks. The Bank for International Settlements is headquartered in Switzerland. It coordinated work between central banks and conducts economic research.

http://www.kommersant.com/p-12707/international_banking