HSBC Drops Out of Retail Banking in Russia

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HSBC on Monday became the latest foreign bank to pull out of retail banking in Russia as large state-owned banks have come to dominate a business that had been expected to provide a rich growth opportunity for foreign institutions, The New York Times DealBook blog reported. HSBC, Europe’s largest bank by assets, said it would close five retail branches in Moscow and St. Petersburg and focus instead on providing global lending services to industrial and corporate clients. The manager of the bank’s Russian operations, Huseyin Ozkaya, said in a statement that a review of the market showed corporate banking offered the ‘‘strongest opportunity’’ for HSBC in Russia. HSBC started its retail business just two years ago, with a grand opening on Bolshaya Nikitskaya Street in Moscow. Its withdrawal comes after Barclays of Britain and Banco Santander of Spain either quit or scaled back plans to open retail banks. This is a sharp change from a few years ago, when foreign banks piled into the country and expectations for quick growth in retail banking were high. Foreign banks attracted consumers with new services like Internet banking, linked investment accounts and online bill payments. But the business was considered particularly appealing because foreign banks were thought likely to benefit from Russians’ deep distrust of their own financial institutions, after a series of scandals and ruble devaluations wiped out savings in the 1990s. The expected erosion of Russian state banks’ share of the retail market, however, never took place. Sberbank, a former Soviet retail bank, began offering similar services to those of foreign banks. Sberbank then bolstered its reputation after the global financial crisis by taking pains to emphasize its state-backed financial stability as Western banks teetered. Read more.