From its beginnings as the Soviet Union’s savings bank to its present incarnation as universal powerhouse, Sberbank’s trajectory reflects Russia’s meteoric rise to a major player in global markets. Yet as a bellwether of Russia’s economy, the near-term fortunes of the bank – Russia’s largest financial institution – are somewhat at the mercy of the volatile financial and political climate.
Nevertheless, despite the recent worsening in the perception of Russia risk and the banking sector in general due to slowing growth and liquidity constraints, the outlook for Sberbank remains “robust”, says Olga Naidenova, banking sector analyst at Alfa Bank. This is largely due to “its safe lending and strong deposit base”, she adds. Its strength today is largely down to its recent history. Just five years ago, Russia’s central bank called on the financial giant to expand its loan portfolio away from large, conservative exposures to a small number of financial and industrial groups.
Sberbank was quick to respond. Buoyed by high economic growth – at 7.6% last year – the bank now plays an instrumental role in disbursing the fruits of Russia’s oil wealth to the wider population through consumer and commercial loans. Thanks to its expansion to 20,000 branch offices spanning 11 time zones, Sberbank has lived up to this nation-building role and now holds 62% of the country’s retail deposits, according to Credit Suisse.
It achieved this through a conservative strategy focused on domestic expansion and wholesale banking. “Sberbank is an example of an institution that can be conservative, receive state backing and still be well run,” says Olga Naidenova, banking sector analyst at Alfa Bank.
In contrast to Russia’s second largest bank VTB (formerly Vneshtorgbank), which has expanded globally, including into India and south-east Asia, Sberbank has its sights focused on Russia and the CIS where it aims to be one of the top 10 banks by capital in Ukraine and Kazakhstan.
Focusing on old-fashioned wholesale and the nascent retail banking industry has borne healthy profits. The bank saw a 40% rise in net profit for the first seven months of this year to 81.8 billion roubles ($3.37 billion), according to Russian accounting standards. New chairman and former economy minister German Gref, who took control of the institution in December 2007, is reluctant to pursue aggressively an investment banking franchise to rival global peers. With 85% of its securities allocated to Russian sovereign and central bank debt, its conservative portfolio allocation ensured no write-downs related to the US asset-backed securities this year. Olga Veselova, equity analyst at Troika Dialog at Moscow, praises the bank’s risk-averse investment strategy against the backdrop of Russia’s now tightening liquidity environment.
She also says, “The team is moving to innovations, but still within the frame of a national savings bank with a social role.”