| The Societe Generale Vostok retail project can pay for itself in three years On March 31, the French group Societe Generale covered the losses of its Russian subsidiary bank Societe Generale Vostok (BSGV) associated with active retail expansion in Russia. Michel Bricoud, general director of BSGV, announced this yesterday. However, the negative financial result does not frighten BSGV. According to Mr. Bricoux, about 30 branches will be opened in seven cities by the end of the year, and the retail project could become profitable three years after the start.
At the end of 2003, BSGV announced its intention to build a large retail network (26 branches in Moscow by the end of 2005) and attract more than 200 million euros per year, including 40 million in the form of private deposits. According to CEA Interfax, as of January 1, BSGV's assets amounted to about 401 million euros, equity capital - 40 million euros, private deposits - 45 million euros. The general director of the Rus-Rating agency, Richard Hainsworth, notes that the French bank “played into the hands of the summer crisis of confidence and the outflow of deposits from medium-sized Moscow banks.” Now BSGV employs about 600 people, by the end of the year there will be 1000 employees, and in 2006 - 1500. In addition to Moscow and St. Petersburg, BSGV is going to open branches in Samara, Nizhny Novgorod, Yekaterinburg, Novosibirsk and Rostov-on-Don. The number of private bank clients over the year should increase from 20 to 50 thousand.
But development is not so cheap: at the end of the year, BSGV showed a loss of 122 million rubles, and its capital decreased by 10%. “We are in the process of rapid investment,” Mr. Bricoux explained yesterday. And he complained that during his more than thirty-year career in the banking business, Russia has become the first country where a negative financial result is fraught with administrative problems: “For the first time, I was faced with the fact that the Central Bank makes sure that banks do not have losses.” According to him, according to the law “On Insurance of Individual Deposits,” banks wishing to enter the system are required to have a positive profitability. And although BSGV insured its deposits last year, Mr Bricoux says it is not easy to invest in the Russian economy without losses.
A return on capital of 18-20% would be a good result, Michel Bricoux told Vremya Novostey: now the profitability of the retail business in SG outside France is 22-33%. But positive returns on retail projects are usually achieved after three years of investment. Vice President of Citibank Natalya Nikolaeva recalls that, having invested in retail since the end of 2002, the bank operated at breakeven due to high income from corporate business. “But if it weren’t for the strong corporate direction, there would have been losses,” she notes. According to Ms. Nikolaeva, it takes three to five years to pay off a retail project. Richard Hainsworth notes that BSGV's main task is to build an effective network: “If they manage to open one point of sale in each of the announced cities, it will be a huge shift. However, I would not underestimate such features of business in Russia as administrative barriers.”
Recently, Rusfinance, a subsidiary of Societe Generale in Russia , specializing in consumer lending, announced the acquisition of Samara Promek Bank from SOK Group. As a result of this transaction, Rusfinance expects to take a leading position in the car lending market. Michel Bricoux reported yesterday that BSGV would also not refuse to buy “a transparent and inexpensive bank with a good retail network.” Yuri VERETENNIKOV |
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