Transcript Тенденции и проблемы российского рынка - Alfa-Bank

Strategy for Competing in
Russia’s Banking Market
Oleg Tumanov,
Deputy CEO
Alfa Bank, Moscow
London, December 2003
1
Contents
1
Russian banking sector: general overview
2
Corporate segment
3
Retail segment
4
Investment banking
2
Russian banking sector: general overview
Stages of banking business development
GDP per capita
Beginning

Formal regulation

Inexperienced clients
Growth


More experienced clients
Healthy demand for
traditional commercial
products
Maturity


Experienced clients
Demand for investment
bank products
Spain
5-8 years
Greece
Czech
Poland
Russia
Albania
Romania
Source: McKinsey Analysis
Hungary
Croatia
Bulgaria
Ukraine
Corporate Loans/GDP
3
Russian banking sector: general overview
Comparison of Russian and international banks
Return on Assets
Return on Capital
4
30
25
3
%
2
1
20
3,8
% 15
30
10
1,4
0
0,8
Russia
Hungary
5
1,13
0,62
21
0,27
14,7
13,7
12,55
8
0
Av. Europe
Czech
Switzerland
USA
Russia
Hungary
Av. Europe
Czech
Switzerland
USA
Asset/Capital Ratio
30
25
раз
20
28
15
10
5
7,7
14
16
21,7
11
Russia
Hungary
Czech
Av. Europe
Switzerland
USA
 Return on assets and
capital is still higher
in Russia
 Asset/capital ratio in
Russia is smaller
0
Source: PWC Selective research
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4
Russian banking sector: general overview
Situation Complicates on the Financial Markets
Competition is increasing in all segments
Competitors’ effectiveness is growing
Margins and profitability are decreasing
Customers are becoming more demanding
Risks and volatility are on the increase
Better access to funding
5
Russian banking sector: general overview
Competition is increasing
•M&A in banking sector
•MDM banking group – $3.6 bln assets
•NIKoil-UralSib group – $3.5 bln
assets
•Rosbank-OVK – $3.2 bln assets
•Trust-Menatep – $2.5 bln bank assets
•MNR-Eurofinance – $0.9 bln assets
•Foreign bank penetration
•Raiffeisen to set regional network in ‘04
•Citibank plans 20-30 branches in ‘04
•Soc.Gen. plans 26 branches in ‘05
•Zenit group – $1.8 bln (expected)
Development of branch network is a priority
Nb. of branches
 Societe Generale,
Citibank, and Raiffeisen
are investing in networks
500
400
300
 Intesa announced
opening of subsidary
200
100
0
Ro sbank
VTB
Branches, Jan 2003
Sources: Alfa Bank statistics, CBR
B ank o f
M o sco w
Citibank
Raiffeisen
 In 2003 M&A activity
involved the largest
private Russian banks
Branches, Jan 2004
6
Russian banking sector: general overview
Western Banks Expand to the Russian Market
Banks with Western participation :
Corporate Deposits Market Share, %
Banks with Western
participation increase
market share
8
7
6
5
Banks with Western participation:
Retail Deposits Market Share, %
4
3
2
1
2.5
0
1997
1998
1999
2000
2001
2002
2.0
Growth Rates of Loans to Russian Borrowers
1.5
%
90
Russian banks
Banks with
western capital
70
50
1.0
0.5
30
0.0
10
-10
1997
2000
2001
1998
1999
2000
2001
2002
2002
Source: «Banking on Russia» conference,
London, 19-21.05.03
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Russian banking sector: general overview
Loan spread is still high, but margins are declining
Net banking revenue by product, %
Loans
Loan spread, %
Other
Russia
7.5
Bulgaria
8.4
Croatia
2.8
Poland
2.7
1.3
Western Europe
0
25%
20
40
60
80
100
Spread on corporate loans and deposits
20%
Rates on $-denominated
loans to corporate clients
15%
10%
5%
0%
10.01.99
Rates on $-denominated
corporate deposits
10.01.00
10.01.01
Sources: Alfa Bank statistics, CBR, McKinsey
10.01.02
10.01.03
 7.5% loan spread in
Russia is still high
 Under pressure from
an international
decline in rates,
banking loan rates are
down
 Lower margins
pressured banks to
develop client base
8
Russian banking sector: general overview
Increasing Requirements for
Banking Business Effectiveness
Lowering Margins
RUR loans – RUR deposits
USD loans – USD deposits
16
14
12
Cost of being in business
10
8
6
1Q 2Q
‘01 ‘01
3Q
‘01
percent points
Source: «Expert» magazine
4Q
‘01
1Q
‘02
2Q
‘02
3Q
‘02
Growth if USD prices on the main
business-supporting factors
4Q
‘02
140
130
% 120
110
100
2001
2002
2003
Staff costs
Rent and Maintenance
Energy
PR and Advertising
Source: Alfa – Bank estimation
9
Russian banking sector: general overview
Russian Financial Market
Corporate
Retail
Investment
+
++
+
Market Growth
Insurance
++
Competition
high
average
(growing)
very
high
very
high
Margin/Profitability
high
(falling)
average
(falling)
high
low
Volatility/Risk
high
low
very high
average
Source: Alfa Bank
10
Russian banking sector: general overview
Which business to develop?
Invest
High
Retail
Asset
Management
Corporate
Insurance
Investment
Support
Low
Source: Alfa Bank
Current status
Growth
potential
Low
High
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Corporate segment
Option 1: Russia has 7,800 SMEs
Only 470 companies with annual revenues > $100 mln
7,800 companies in
Russia have revenues
$5-100 mln a year
MNC's (>5,000)
Large (100-5,000)
250
1
8
16,000
700
470
Half of these companies
are involved in trade and
services
Company distribution by sector
400,000
28,000
7,800
Mid-sized (5-100)
Others
Natural resources
Heavy industry
Transport and
communications
5 major EU
markets
CEE
Russia
Trade and services
Sources: McKinsey, BCG presentation
12
Corporate segment
Option 1: Why are banks not in a rush?
What constrains your activity?*
High risk in the real
sector constrains
lending to SMEs
4.5
4
4
3.29
3.5
2.86
3
2.43
2.5
Low transparency is a
key obstacle for loans
to SMEs
2
1.5
1
0.5
0
Lack of attractive
borrowers
High level of risks
Lack of financial
resources
What hinders lending to SMEs?*
Lack of instruments
to invest
5
4.5
4.5
4
Source: Development Center (poll of top-20 banks)
Note:* the figures used in the charts represent the poll
participants’ assessments of the relative importance of
available answers
3.67
3.5
3
2.5
2.5
2.33
2
1.67
1.5
1
0.5
0
Non-transparent Inability to provide High cost of credit Inability to control
accounting
loan collateral
analysis
lending risks
Lack of credit
history
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Retail segment
Option 2: Targeting the retail segment
 Comparison with Poland on
loans per capita sets value of retail
market at $40 bln vs. current $4 bln
Retail loans per capita, $
4,000
3,114
3,000
 Comparison with Poland on
loans/GDP sets this value at $20 bln
2,000
1,000
477
279
253
24
12

Loan growth to come from:
Russia
Romania


Mortgages – just $200 mln now
Auto loans – could potentially
total $7 bln vs. $0.7 bln today
0
Germany
Czech Hungary
Republic
Poland
Retail loans and deposits by country
50%
Share of cars sold via loans
40%
80%
30%
20%
60%
10%
40%
0%
70%
20%
Czech
Republic
Croatia
Hungary
Retail deposits, % GDP
Sources: Alfa Bank estimates, BIS, CBR
Poland
Romania
Russia
8%
0%
Retail loans, % GDP
Germany
Russia
14
Retail segment
Option 2: Targeting the retail segment
“Has your family ever taken credit?”
Rates onRetail
retail lending attractive
are attractive
20%
19.0%
17.8%
17.0%
100%
16%
89%
79%
80%
13.6%
12%
10.3%
10.5%
10.2%
9.0%
8%
4%
60%
0%
3 months-6months
Private individuals
40%
20%
6 months -1 year
12%
9%
4% 2%
5%
0%
0%
Yes, once
Yes, twice
Moscow
Sources: CBR, polls by IRG
Yes, three
times and
more
Total Russian
Never
1-3 years
Above 3 years
Enterprises
 Polls indicate 89% of
Russia’s population has
never taken out a loan
 Retail loans are twice as
expensive as corporate
loans
15
Investment banking
Option 3: New market instruments for $12 bln
•Current markets to increase
Ruble corporate bonds –from $5 bln tо
$10-12 bln.
Currency corporate bonds –from $0,8
bln tо $2 bln
Credit notes –market size may increase
to $0,5-$0,7 bln
 Underwriting is shared
between Alfa Bank, Trust,
MDM, Rosbank and
Raiffeisen
 Current markets may
expand by $9 bln
 New instruments will
demand up to $3 bln
•New markets
Mortgage bonds – half of the $70 mln
DeltaCredit portfolio was sold through a
private deal; potential market may amount to
$0,3-$0,4 bln
Securitization of retail lending portfolio –
may amount to $1-2 bln over several years
Derivatives papers – forwards, options,
futures – may increase by several times from
$50 mln
Source: Alfa Bank statistics
16
Investment banking
Option 3: M&A market of $5 bln in 1H03
Equity market at 67%, concentrated on oil
•M&A in 2002-2003
100%
8%
17%
80%
M&A accounted to $4.9 bln in
1H03 versus $4.5 bln in 2002
60%
212 deals are reported in 1H03
40%
versus 291 in 2002
20%
67%
40%
17%
25%
12%
0%
MCAP
Net revenue contribution, Alfa Bank 2002
Corporate
Finance
6%
Securities
21%
Sources: Alfa Bank statistics, RTS, Goskomstat, KMPG
Services
Other Industries
Oil & Gas
 Only 5 IPOs took place
from 2000 and 25 are
coming
FX
10%
Commercial Bank
63%
Manufacturing
GDP
 M&A market is driven by
asset consolidation
 Commercial banks
account for 63% of Alfa
Bank revenues
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