MOSCOW. (RIA Novosti commentator Anatoly Gorev)

These are gloomy days for Russian bankers. At a recent meeting of the State Council presidium, it was announced that foreign banks account for up to 40% of all loan services provided in Russia.
Their share of the market is so high in spite of the fact that not all foreign banks that could come to Russia have done so, and those that have are allowed to operate only through subsidiaries or through Russian banks where they have bought a stake.
The concern of the Russian financial authorities and banking lobbyists is easy to explain: almost all foreign banks posted a considerable increase in their credit portfolios between October 1, 2005 and October 1, 2006. It is indicative to compare two banks, the International Moscow Bank and Raiffeisen Austria. The value of their loans to individuals grew by 138.4% and 759.7%, respectively. The Austrian bank, however, saw a decline in the share of corporate loans in its portfolio, which fell by 65.5%. Nevertheless, it is obvious that both banks have significantly reinforced their foothold on the loan market. So did Rusfinance Bank, the retail subsidiary of Societe Generale, a French concern, whose loans to individuals soared by 208%.
Even banks that have only come to Russia this year have performed well. GE Money Bank, for example, which some time ago bought Delta Bank, accumulated a 3 billion- ruble credit portfolio by October 1, 2006. Nevertheless, it lags far behind market veterans like Raiffeisen Austria and Citibank (their loans to individuals equal 18 billion and 25 billion rubles, respectively). Yet experts believe that this was not a bad result for a period of adjustment.
The situation is all the more depressing for Russian bankers given that over the period between October 1, 2005 and November 1, 2006, some domestic banks that occupied strong positions on the loan market were sold to foreign lending institutions. In addition to the takeover of Delta Bank by GE Money Bank, Raiffeisen bought Impexbank, Scandinavian Nordea acquired Orgresbank, and Societe Generale purchased a 20% stake in Rosbank. All these Russian banks have done very well in terms of loans to individuals. In fact, it was because of their successful policies in this area that they attracted the attention of wealthy foreign groups, experts say.
"Foreign banks that have come to Russia in recent years have achieved impressive results," said Irina Busheva, vice-chairwoman of the board of Vneshtorgbank 24, a Russian retail bank. Western banks have set up a quality retail business, she said. "These banks are now among the largest in terms of their aggregate retail and corporate business and are ranked from 6th to 50th in assets," she added. Other experts believe that foreign banks stand a serious chance of making it into the top 10 in the retail sector in the medium term. After all, they have enough opportunities to refinance their credit portfolios, mainly by borrowing cheap on foreign capital markets. Russian banks, except such giants as Sberbank and Vneshtorgbank, are unable to compete: they have to borrow at less favorable terms or make a great effort to attract individual deposits. Given falling interest rates and the ongoing consumer boom in Russia, this is not easy.

As of July 1, 2006 non-residents owned a stake in 144 of the 1,221 lending institutions registered in Russia, according to the Russian Central Bank. As many as 48 lending institutions, including 47 banks, were 100% owned by foreigners. Their number grew by 5 in the second quarter of 2006. Also, there were 10 lending institutions in which foreigners held more than 50% but less than 100% of authorized capital.-0-