The size, funding advantages, and pricing power of Savings Bank of the Russian Federation (Sberbank) have a huge influence on the competitive environment of the Russian banking sector, Standard & Poor’s Ratings Services says in a report recently published (“Sberbank Dominates the Russian Banking Market”).
“Sberbank towers over all other Russian financial institutions,” says Standard & Poor’s credit analyst Ekaterina Trofimova. “The bank’s dominant position gives it pricing power with respect to all other market players, in particular in collecting retail deposits.”
The bank has a 40% market share of total deposits, over two-thirds of retail deposits, and a dominant share of 30% in corporate lending.
Trofimova explains that at various times during the past few years Sberbank (61%-owned by the Central Bank of Russia) has aggressively expanded market share in certain areas, most notably in corporate lending, where it has the means to undercut lending rates of other banks due to its privileged funding position.
The bank leverages off the retail market by serving corporate clients in strategically important sectors of the economy such as oil and gas, machinery, and metallurgy. The bank plans to further diversify its corporate client base by targeting small and midsize companies.
The report notes that the risk profile of Sberbank (not rated) is enhanced by the bank’s leading position in the Russian banking sector as the state-owned savings bank, its ample liquidity from customer deposits, and its improving financial performance. Negative factors include the bank’s heavy cost base and the high lending risk inherent in operating in the Russian economy, particularly as the largest public-sector bank.
The commentary article “Sberbank Dominates the Russian Banking Market” is available to subscribers of RatingsDirect, Standard & Poor’s web-based credit analysis system, at www.ratingsdirect.com.