UK banking group HSBC is regarded as one of the
most globally outward-looking banks with a focus on emerging
markets. With slim picklings to be found at home, in the retail
market at least, HSBC is turning its attentions towards Russia with
a bold expansion plan backed by $200 million of new capital.
HSBC has given the job of kick-starting the
bank’s growth drive in Russia to Stuart Lawson, who has been
appointed as CEO designate, and who comes with a decade’s
experience of running banks in Russia, including Deltabank and Bank
Soyuz. Lawson replaces Jon Hartley, who helped HSBC to gain a
retail banking licence in Russia during his tenure.
HSBC will initially focus on bolstering its
market presence in the corporate banking sector, although growth
across all business lines is a firm objective. HSBC provides a
range of corporate banking, investment banking and financial
markets products and services to multinational and domestic
corporate and institutional customers in Russia.
It is likely that retail banking and card
growth will also figure highly in HSBC’s growth strategy in the
near future. Russia boasts a population of over 142 million and has
shown year-on-year growth in both household income and GDP over the
last few years. According to HSBC, Russia’s GDP per head is
expected to grow from less than $2,000 in 1998 to an estimated
$9,000 this year. So far, credit cards and other forms of consumer
finance have low penetration rates, with only 25 percent of the
population using consumer credit in 2005, but growth trends are set
to continue on an upward trajectory.

Consumer credit demand

The explosive growth of the middle class in Russia means that
consumers there are beginning to emulate those in the west in their
requirements for both low-value and high-value consumer goods.
Consumer finance players in the country have so far focused on
offering instalment loans at the POS, although revolving credit is
on the rise. Consumer lending at the POS is the main customer
recruitment and retention method for banks in Russia and is used as
a building block from which to offer credit cards and other credit
lines. According to Russian bank HCFB, the credit card market
increased by 230 percent in 2005 and by far outpaced other lending

The Russian retail banking market is highly fragmented, with over
1,200 banks operating in the country – however, the bulk of these
are not termed full-service banks. Although some Russian players,
such as Russia Standard Bank and Sberbank, are active within the
card payment space, the relative lack of POS and ATM infrastructure
has made card acceptance an obstacles to growth and it has been
left to foreign entrants to drive the market. A few foreign
players, most notably Citibank and GE Money, have taken advantage
of this gap in the market to launch revolving credit products, with
Citi launching credit cards in 2003 and now counting over 350,000
cards in issuance, up from 180,000 at the beginning of 2006. Its
own distribution network includes over 60 retail branches and more
than 300 ATMs.



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Regulatory support

Russia’s regulators also ramping up efforts to promote card
payments, and in 2006, legislation was introduced which obliged
merchants with a certain level of sales per month to implement card
acceptance terminals. The market has also been helped by the
development of credit bureaux and lender databases.

HSBC has for now ruled out acquisitions and is
focusing on organic growth. It has bought a site designated as a
back-office operation and training centre, which is expected to be
open by mid-2008. According to Lawson, this will form the
foundation of HSBC’s retail offerings in the country by supporting
both internet and telephone banking, as well as a fledgling branch