Barclay’s Backing out of Russia

Today Barclay’s Bank announced its decision to withdraw from the Russian retail banking sector; an announcement precipitated, it would seem, by write downs of nearly $400 million, which are prompting commentators to compare it to US financier George Soros’ 1997 purchase of a stake in the Russian communications company Svyazinvest, in his words, ‘[T]he worst investment of my life’.  Beyond Brics however suggests foreign banks need not necessarily be deterred:

But Barclays’ failure in Russia’s retail banking market didn’t come as a surprise and it shouldn’t scare investors, says a senior analyst at Troika Dialogue: “For every foreign bank that exits, there is another waiting to enter”.

Barclays said it would focus on its corporate, financial institutionand government clients through Barclays Capital, its investment arm. BobForesman, head of Barclays Capital Russia, said:

The strongest opportunity for Barclays in Russia lies inexpanding our investment banking business focusing on corporate clients,financial institutions and government entities from our operations inMoscow. Last year we helped our Russian clients raise over $14bn ofcapital, making us the leading bookrunner for domestic issuers ofinternational bonds, as well as advising clients on M&A and equitycapital markets.

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Andrew Keeley, the analyst at Troika Dialog, told beyondbrics thatretail banks in Russia had a difficult time during the financial crisisbut in general retail lending in the country has significant growthopportunities.

Retail lending is still a fledgling sector, Keeley said.

Generally you have an underleveraged consumer that isbecoming more finanically literate and wants better quality products andservices. The Russian mortgage market and products such as credit cardsare still very much in their infancy.