French bank BNP Paribas is to spin off its last remaining Russian consumer-credit business into a joint venture with Sberbank as it reduces its presence in the heavily state-influenced retail banking market. Britain's Barclays and HSBC have already left the Russian retail market, as banks slim down their balance sheets to beef up capital in the face of tougher regulations and Europe's debt crisis.
The partnership will allow BNP to avoid a wholesale pull-out of the tough Russian retail market, which is dominated by state-connected banks like Sberbank and VTB. Sberbank will own 70 percent of the joint venture and the French bank will hold the remaining 30 percent of the unit, which will operate under its Cetelem brand, the companies said.
"Sberbank is bringing its network, which is enormous ... Cetelem, meanwhile, is bringing existing partnerships and its expertise in loans," said Pascal Roussarie, a spokesman for Cetelem. "We wanted to stay in the consumer market."
BNP said last year it was putting a stop to much of its stand-alone retail banking activities in Russia. The consumer credit business, or point-of-sale lending, involves offering loans to clients directly in the store where the purchase is made, as opposed to at a bank branch.
BNP's 800 million-euro ($1.05 billion) existing Russian consumer loan portfolio will stay out of the joint venture but future lending will be done via Cetelem, Roussarie said. Russian consumer lending has been dominated by privately-owned foreign and local players like Home Credit & Finance Bank and Russian Standard Bank, but the new joint venture is likely to squeeze their margins as Sberbank can offer lower loan rates due to a cheap funding base.
The deal further strengthens Sberbank, known in Russia as an "elephant" as it accounts for a quarter of overall domestic banking assets and a third of total loan portfolio. Russia's state-owned banks control around 60 percent of the country's banking sector by assets.
The BNP-Sberbank tie-up will aim for a 25-30 percent share of the Russian market for consumer lending at the point of sale, BNP personal finance chief Thierry Laborde told French daily Les Echos. The French bank needed a Russian partner "because BNP Paribas had decided not to develop its retail banking but wanted to remain on the fast-growing consumer credit market," Laborde was quoted as saying.
Laborde said that spinning off its assets into the joint venture would help lighten its total risk-weighted assets, which is one way banks are looking to shield themselves from tougher regulatory capital requirements. BNP and Sberbank said they expect to close the transaction in mid-2012. The two parties said in June they were in talks to create the venture.
The Russian units of Italy's UniCredit and Austria's Raiffeisen Bank International are the largest foreign players in Russia, while BNP Paribas's French peer Societe Generale also wants to expand its Rosbank business.
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