Bloomberg News

SocGen Plans to Capture Russian Growth as Improvement Holds (1)

June 19, 2013

Societe Generale SA (GLE) forecasts an improvement in Russia will continue this year as France’s second-largest bank seeks to move beyond the arrest of the former head of a local unit in a bribery sting.

“Yes, we are here to capture growth,” Didier Hauguel, the French lender’s chief country officer, told reporters in Moscow. “We’re mindful to grow our business in a balanced way.”

Societe Generale, Italy’s UniCredit SpA (UCG) and Vienna-based Raiffeisen Bank International AG (RBI) are among Western banks keeping a retail presence in Russia after rivals such as Barclays Plc (BARC) and HSBC Holdings Plc (HSBA) abandoned theirs. The French bank, which owns Moscow-based OAO Rosbank (ROSB), made a profit of 39 million euros ($52 million) from Russia in the first quarter, or 4.6 percent of its recurring profit, compared with 3 million euros a year earlier.

Societe Generale aims to achieve more 15 percent return on equity, a key measure of profitability, by 2015, the bank said in an e-mailed statement today. That compares with 12 percent in the first quarter of the year.

The target trails the return-on-equity posted by state-run OAO Sberbank (SBER), Russia’s biggest lender, which controls just under 50 percent of all deposits. Sberbank’s ROE was 21.3 percent in the first quarter, down from 27.9 percent a year ago. VTB Group, the country’s second-largest bank, posted ROE of 15 percent.

Lagging Behind

Foreign-controlled banks were overrepresented among Russia’s loss-making lenders last year, according to the country’s industry regulator.

Of the 48 banks that ended last year with losses, 13 -- or more than a quarter -- are majority-owned by foreigners, Russian central bank Deputy Chairman Mikhail Sukhov told reporters in January. More than 100 of Russia’s 896 banks are controlled by foreign capital, he said.

Societe Generale serves about 5 million clients in Russia with 23,000 staff at units including Rosbank, car-lending division Rusfinance and mortgage lender DeltaCredit.

Rosbank is cutting 800 jobs this year, Societe Generale’s Chief Executive Officer Frederic Oudea told reporters today. Rosbank’s job cuts, mostly at back-office functions at the Moscow headquarters this year, will bring staff reductions to about 3,000 between 2012 and 2013.

Societe Generale, based in Paris, aims to attain 900 million euros of cost savings globally by 2015, with half the effort coming from its consumer-banking businesses, the Paris-based lender said May 7, without giving more details on Russian cost cuts.

CEO Fired

The French bank scrambled last month to replace the division CEO of Rosbank Vladimir Golubkov, who was arrested for soliciting $1.5 million in a bribery sting operation. First Deputy CEO Igor Antonov was appointed head of the Moscow-based unit.

Golubkov, who has denied any wrongdoing, is under house arrest and faces up to seven years in jail. Golubkov is one of the most senior Russian bankers held for bribery, according to the Interior Ministry. When his office was raided on May 15, Golubkov was found with 5 million rubles ($159,000) of the $1.5 million he demanded from a company to prolong a loan and reduce its cost, police said.

Indirect Risks

Societe Generale “didn’t identify any direct risks” from a financial point of view from Golubkov’s case, Deputy CEO Bernardo Sanchez Incera told shareholders at an annual meeting last month. It is is monitoring indirect risks from the case, he said.

“We are totally committed and have taken all the remedy actions,” Oudea said today.

Societe Generale raised its stake in Rosbank to about 82 percent after agreeing in 2010 with billionaire Vladimir Potanin’s Interros Holding to merge its local operations into Rosbank. Potanin remains a shareholder. Rosbank runs more than 600 branches in Russian cities and towns from Moscow to Vladivostok.

Societe Generale merged Rosbank with its other Russian branch network BSGV in 2011, while mortgage lender DeltaCredit and consumer lender Rusfinance both became Rosbank’s fully owned subsidiaries at the start of that year. Societe Generale owns an 82.4 percent stake in Rosbank.

To contact the reporters on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net; Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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