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10 Jul, 2008 03:18

Russian banking weathers the global storm

As banks around the world continue to experience losses in a time of financial turmoil, the under developed state of the Russian financial sector means it's been largely unaffected by the crisis.

35 of the world’s top 1,000 banks on The Banker’s 2007 ranking are Russian.  That’s up from 25 last year.

At a time when many experts are predicting losses for the world financial system to top a trillion U.S. dollars, Russia’s financial institutions are faring quite well.

Eastern Europe’s top three banks are Russia's Sberbank, ranking 33rd in the world, VTB at number 60, and Gazprombank in 112th place.

Analysts say Russian banks are generally sound and have good long-term prospects.  But Russia has not been completely immune to the grim outlook across the world financial sector.

Erik DePoy, Equity Strategist, Alfa-Bank, Moscow says the fact that Russian banks weren’t investing in the same securities which have turned to ash for their international counterparts means they are on surer ground.

Russian banks NEVER got into these toxic securities…which has made many of these banks in the West insolvent.  What we've seen – the Federal Reserve, the European Central Bank – they've had to resort to measures to keep these banks afloat. 

The Central Bank of Russia has taken some preventative measures – effectively increasing the liquidity of the country's banks. But the Central Bank's major task is fighting inflation – arguably the biggest threat to the country's economy today.

Ivan Ivanchenko, Global Head of Strategy Research, VTB says the focus on growth provides opportunities in the Russian banking sector

The underlying growth of the Russian economy remains key here.  If we think about it, Russia really needs more sophisticated, more developed, more broad financial system to rely upon.  I view a lot of opportunities for global financial institutions in Russia because capital markets are still developing very fast.

Russia has to find a balance between the need to integrate further into the world financial system to drive growth, and also try to keep the financial stability it has enjoyed in recent years.