KOMMERSANT. Chinese lender China Construction Bank, which operates only a representative office in Russia, will open a full-fledged subsidiary bank in Russia and invest around $150 mln in its capital, business daily Kommersant writes quoting information about the decisions adopted by the Chinese bank’s BoD on August 19. China Construction Bank opened a representative office in Moscow this May and at that time the Chinese bank announced ambitious plans with regard to the Russian market without ruling out the possibility of buying a bank in Russia.
China Construction Bank is the second largest bank in China. Assets under its management total $1.63 tln and its capitalization is over $169 bln. Currently, two Chinese banks — Bank of China (Elos) and Trade & Industrial Bank of China — operate in Russia. Just before the crisis Bank of Communications, No. 5 in China, tried to enter the Russian market through the acquisition of RosEuroBank, but the deal fell through.
In the past two years European investors, on the contrary, have showed their disappointment in the Russian market. The aspiration to leave the Russian market has already been voiced by Belgian KBC, British Barclays, while Swedbank and a number of smaller foreign players downsized the scale of operations. But Asian investors do not share pessimism of European banks. “In recent years Asian investors have kept an eye on Russia, all the more since banking assets are much cheaper now and expansion could require far less resources (before the crisis banks were sold at 3—4x of capital, right now not higher than 1.5 — Kommersant note),“ says AFK Sistema senior analyst Evgeny Nadorshin adding that right now it is more interesting to invest in Russia as Russia holds stronger growth potential than Europe. “But, in the meantime, our region is of interest to China not only commercially, but also geopolitically,” he says. In addition, those European banks that are about to leave Russia have been doing this not because of the problems in Russia, but due to the difficulties faced on other markets: they focus on regions that are of priority to them and therefore scale down business here,“ specifies Oleg Ponomarev, head of corporate finance at UniCredit Securities. “Asian investors don’t have problems and, at the same time, have substantial financial resources to expand business outside their markets,” the expert adds.
Such a large cash injection into the capital of a Russian subsidiary (around Rub 4.4 bln) will allow the Chinese lender to set up a universal bank from scratch. As the newspaper points out, a lending institution with capital over Rub 3.6 bln, under the Federal Law “On Banks and Banking Activity”, has the right to immediately obtain a license to serve retail customers. Otherwise banks wait for such a license for two years.
Meanwhile, the Chinese bank has a good background to roll out just retail operations in Russia, experts believe. “China Construction Bank is one of the largest mortgage lenders in China,“ specifies Emil Yusupov, head of retail operations at BrokerCreditService, adding if the bank pursues the same strategy in Russia — and their plans have so far been unknown — Russia has strong potential of market growth after the crisis. “If the mortgage segment restored sluggishly last year, now we can say that this segment has been growing aggressively,” he adds. On Monday business daily Kommersant was unable to receive comments from China Construction Bank due to time difference.
However, China Construction Bank will not be able to operate under its corporate name (by calling, for example, its subsidiary as China Construction Bank) in Russia. A provision of the Civil Code of Russia took effect in 2008, according to which companies that operate in Russia are prohibited to have the name of a foreign state in their corporate names. However, not a single bank of those Chinese lenders that already carry on business in Russia has been renamed in more than two years.
