* Sberbank became largest Russian company this month
* Bank posted record profits despite economic crisis
* Sberbank part owned by central bank, close ties to Kremlin
* Other banks complain it is stifling competition
By Alexander Winning
MOSCOW, March 28 Russian banking giant Sberbank
has become so powerful that when it cuts interest
rates on loans, other banks feel forced to follow. Now it wants
to extend its reach into other areas of the economy.
This month the former Soviet savings bank, which is still
half-owned by the central bank and is headed by an ally of
President Vladimir Putin, overtook oil company Rosneft
to become the biggest company in Russia by market value.
With over a third of Russia's banking deposits, Sberbank has
a market grip unseen in most Western economies.
It has thrived despite an economic crisis and Western
sanctions on Russia, winning market share from domestic rivals
and making a record $9.5 billion profit in 2016.
Sberbank now wants to use its huge reach to sell customers
across Russia's 11 time zones everyday services such as
education and healthcare, earning fees even if it will not be
the one providing those services.
It also wants to expand its investment products and will be
one of only two banks authorised to sell government bonds to the
general public from next month.
This will deepen its influence over major sectors of the
economy, and the bank hopes it will help reduce its reliance on
"We have to invent a way to increase our fees and
commissions," the bank's Chief Financial Officer Alexander
Morozov told Reuters. "We have to think about the future low
interest rate environment."
Sberbank has not given detailed information on which
non-banking services it will offer as the plans for its
"financial ecosystem" are in their infancy.
Domestic projects have become more of a priority for
Sberbank since its ambitions for international expansion were
thwarted by Western sanctions, which made some clients wary of
dealing with the bank for compliance reasons.
Sberbank also aims to strengthen its financial position by
closing more branches – it shut around 1,300 last year – and
move more customers online. Chief Executive German Gref has said
by 2025 it could have only half its current 330,000 staff.
The bank wants to achieve return on equity (ROE) – a measure
of profitability closely watched by investors – of between 16
and 19 percent this year, having hit almost 21 percent in 2016.
Not one of the 50 largest banks in Europe's STOXX index
achieved ROE of over 20 percent last year.
Sberbank has hoovered up clients as hundreds of smaller
banks have been shut down as part of a crackdown on financial
crime by the central bank.
Bankers at some of Russia's other 560 banks say it has
accumulated such a large market share it is hard to compete.
"Russia's banking sector is an oligopoly," a senior
executive at a large private Russian bank said, asking for
anonymity to speak freely. "Sberbank cuts interest rates and we
all have to follow."
On Dec. 1 last year, for example, Sberbank reduced its rates
on some mortgages by 0.5 percentage points. Rival VTB
also lowered interest rates on some mortgages by 0.5 percentage
points five days later and on Dec. 7 Raiffeisenbank, the Russian
unit of Austria's RBI, also cut mortgage rates.
Sberbank's Morozov acknowledged the competition.
"In mortgages the most aggressive competitors always match
any of our moves, some of them continuously keep their offering
lower," he said.
Sberbank's dominant position does not appear to be causing
any concern among Russian policymakers, some of whom see it as
an important sign of economic and banking system strength.
The bank's management has close ties to Putin. Gref was
Russia's economy minister from 2000 to 2007, during Putin's
first two terms as president, before taking over at Sberbank.
He oversaw a plan to reform the economy after a period of
crisis in the 1990s. While he is not in Putin's inner circle he
has a reputation as an effective manager and is close to the
governor of the central bank, Elvira Nabiullina.
Analysts say having Gref and Nabiullina in charge of
Sberbank and the central bank helps Putin guarantee economic
"In order to have the foundations for economic growth and a
stable currency you have to have a well-functioning savings bank
and an effective central bank," said Tom Adshead, head of
research at Moscow-based Macro Advisory.
"Putin understands this. He trusts Gref and Nabiullina and
has them at the centre of his economic plans."
Nabiullina said last year that the confidence in Sberbank
among Russia's depositors was due to it being a state-controlled
Asked about the bank's dominance in the Russian economy,
Nabiullina said the regulator monitored competition but that it
took time for the long-standing structure of the banking sector
"Our task is to create conditions, most of all in
regulation, so that there are equal conditions for competition,"
Nabiullina told a news conference on Friday.
"One can't say we have monopolistic effects."
(Editing by Rachel Armstrong and Anna Willard)