Published May 07, 2013
MOSCOW – Societe Generale's Russian unit Rosbank will cut costs and prioritize improving margins while lending at least 13 percent more in 2013 as it emerges from years of costly restructuring as a viable player in the state-dominated market.
SocGen has struggled to curb costs in Russia and integrate acquisitions made at high valuations during the boom years before the 2008 global crash - pressures that have caused other Western players to pull out of Russia.
Chief Executive Vladimir Golubkov told Reuters in an interview that Russia's No.9 bank by assets was sure of its French parent's long-term backing as it draws up a three-year strategy aimed at driving up profitability.
"Rosbank has good growth potential," Golubkov, Rosbank's CEO since 2008, said. "Russia is Societe Generale's second most important market and a priority development target."
His comments were cleared for publication on Tuesday, after SocGen, France's second-largest bank, reported a 50-percent decline in first-quarter profits and announced a further round of cost cuts.
Rosbank lost market share last year, with its loan book growing by 4 percent compared to broader market growth of 26 percent.
Its cost-to-income ratio, a key measure of operational efficiency, stood at 65.7 percent, above a sector average of 51 percent, according to Natalia Berezina, an analyst with Uralsib.
State-controlled market leader Sberbank enjoys a return on equity of over 20 percent - more than double the target of 10 percent that Rosbank hopes to reach by 2015 under its proposed recovery strategy.
Golubkov said the Rosbank turnaround was on track.
"We had three tough years when we couldn't have shown high results due to our reorganization process but now we can fully concentrate on increasing business efficiency," he said.
SocGen has yet to deliver on the billions spent building up an 82 percent stake in Rosbank since 2006, integrating its back-office and technology platforms, shaking up management teams and cutting more than 2,500 jobs.
Despite a rise in interest income, Rosbank's earnings fell last year by 4 percent to 8.2 billion roubles ($264 million) due to higher provision charges for loan impairment.
Rosbank's retail loan book grew by almost 13 percent to 404 billion roubles ($13 billion), with lending to companies and banks - where margins are much tighter - down 12 percent to 215 billion roubles.
"Forecasting is a thankless task, but we would like to grow in retail lending not less than last year," Golubkov said. In 2012, Rosbank's retail portfolio was mostly boosted by car loans and mortgage lending.
Rosbank has not expanded corporate lending much in recent years, but Golubkov said it wanted to expand credit to business this year at the same pace as retail lending.
Further cooperation with SocGen's investment divisions, such as arranging syndication loans or Eurobonds for Russian corporate names, along with increasing loans to small and medium size business would help Rosbank to boost margins, he said.
"All these (measures) will allow us to increase margins no less than in retail lending. We don't have a target to increase our loan book but he have a target to raise revenue," he said.
"We plan to increase profit thanks to increase in margins both in retail and corporate business, including boosting volumes." Golubkov did not give specific numbers.
Rosbank managed to lower cost-to-income ratio by 7 percentage points last year thanks to its headcount reductions, and plans to reduce the ratio further.
($1 = 31.1045 Russian roubles)
(Editing by Douglas Busvine and Patrick Graham)