Still Too Many Banks in Russia, Fitch Agency Says

Russian news agency Rosbalt quotes the Director of the Financial Institutions Analyst Department with Fitch Dmitry Vasilyev who stated that the number of banks in Russia remains too high even after the Central Bank’s recent cleanup. The number of banks was reduced from over 1,000 to approximately 600 within the last couple of years, Vasilyev said. He stated that the number of banks per million inhabitants in countries comparable to Russia in terms of GDP is lower than the Russian average. Consolidation of the Russian banking sector continues, but it hasn’t affected the smallest banks yet.

Earlier last week, Fitch blew the lid off the troubled financial condition of Bank Peresvet, a bank that has the Russian Orthodox Church as the single largest shareholder, and reduced its credit rating to “D”, designating a bank with weaknesses.

Rosinterbank Folds and Buries Data on 3000 Clients

Russian business daily Vedomosti reports that approximately 3,000 Rosinterbank’s clients with 5 billion rubles (USD 80.4 million) in deposits might not be able to get their money from the Russian Deposit Insurance Agency after the breakdown of their bank. These clients opened or topped their accounts after July 18, the date on which the Agency last collected the data on Rosinterbank’s deposits. Information on Rosinterbank’s deposits after that date is lost, as the bank pulled the plug on the system that monitored it before it folded. Therefore, the Russian Deposit Insurance Agency has information on 84,400 clients with 52.1 billion rubles (USD 837.75 million) in deposits, while the actual volume of deposits held in the bank at the time of its bankruptcy is probably closer to 57 billion rubles (USD 916.5 million). Former head of the bank Marina Krasnova tried to be helpful and delivered the bank’s internal data on clients from mid September, but the Agency has no intention to rely on the list coming from the bank that had previously deliberately disconnected the centralized data collection system. The Agency will review any documents presented by the bank’s clients who placed their deposits after July 18, but there are no guarantees that their claims will be met.
Rosinterbank was one of the fastest growing banks in the country, jumping from 938th to 61st position on the list of banks ranked by assets within six years, from 2010 to 2016. Its aggressive lending policies eventually prompted the Russian Central Bank to introduce mandatory supervision and place limits on attracting private deposits. However, the bank seems to have continued to attract private deposits and engaged in shadow accounting. This practice is nothing exceptional in Russia – for example, one of the smaller banks, Arksbank, had 4 billion rubles of deposits on its official balance sheet and ten times as much on its “unofficial” balance.

Russia Adds Salt to the Sanctions List

…but not just to hurt the biggest exporter of salt to Russia that happens to be Ukraine. 
Business daily Vedomosti reports that the Russian Government added salt to the list of banned imports, a countermeasure to the western sanctions introduced after Russia annexed Crimea in March 2014. Salt suppliers from the Ukraine, United States, European Union, Canada, Australia, Norway and some other countries can no longer export to the Russian Federation. The ban would seem like just another jab in Russia’s continuing exchange with the West if there wasn’t for a peculiar coincidence: at the end of July 2016, Russian General Prosecutor’s son Artem Chayka became the owner of the second largest Russian salt producer, Tiretsky Salt Plant.  
Russian Consumer Protection Service already banned salt imports to Russia from Ukrainian “Artemsol” in 2015 for alleged noncompliance with quality requirements. As a result, Tiretsky Salt Plant’s sales jumped by 42% to 1.3 billion rubles (USD 20 million).  
Russian Government’s Analytical Center warned that the food embargo has a negative effect on the competition in the market, leads to price increases and lower food quality. 

Two Large Insurers Quitting the Russian Health Insurance Market reports that Uralsib and Alliance, two major insurance companies, are looking to sell their health insurance businesses. cites Russian business daily Vedomosti and its three sources from the companies’ top management.

Allianz spent the last three months collecting bids for its Rosno-MS subsidiary. The value of Allianz’s health insurance business is estimated at between 2-3 billion rubles (USD 31-46 million). Prior to spinning off its health insurance, Allianz started to wind down its retail insurance business. Allianz is the second largest insurance company in Russia, with more than 17 million clients.

Approximately a month and a half ago, Uralsib followed Allianz’s suit and put up its health insurance business for sale.

Agriculture Minister Tkachev, the (Un)likely Beneficiary of the Winter Olympic Games in Sochi

Russian business daily Vedomosti writes about the success of Tkachev Agrocomplex Company Ltd., a major agricultural holding with revenues of 38.7 billion rubles (USD 600 million) in 2015 and leading market positions in milk, wheat, and rice production. Located in the southern Russian region of Krasnodar, the holding consists of 60 farming companies and a retail chain with 600 outlets.
Mr. Tkachev, currently serving as the Minister of Agriculture in the Russian Government, bought the company that became the foundation of the future agricultural holding through voucher privatization in the 90’s – not surprising, as his father managed the company (and got Tkachev his first job there) in the Perestroyka years. Tkachev begun building his political career as well, becoming a representative in the regional parliament in 1994 and a Federal Duma deputy in 1995. In 2000, he became the Krasnodar Region Governor and got a big break when Russia became the host of the 2014 Winter Olympic Games in Sochi, located in the region headed by Tkachev. After the games, Tkachev’s agricultural holding received generous financial backing by state-owned Sberbank and Russian Agricultural Bank and started its aggressive expansion, eventually doubling its revenues and land under management.  One of the factors that helped Tkachev’s expansion was a wave of bankruptcies that affected the agricultural sector in the region, enabling his holding, formally owned by his family members, to acquire companies at very low prices and refinance their debt with the aforementioned state banks at favorable rates.  However, on a couple of occasions, Tkachev’s competitors withdrew their offers for the purchase of acquisition targets without explanation, enabling Tkachev to buy the desired companies at lower prices. Financial contortions, generous attitude of the banks and reticent behavior of Tkachev’s competitors indicate that Tkachev’s business success might be more than meets the eye. At any rate, it coincided with Tkachev’s participation in the most important PR project of Putin’s third presidential term and demonstrated that in Russia, business success often mirrors political career.
Tkachev’s business continues to receive government support: in 2015, the Russian Government paid 1.13 billion rubles (USD 17 million) in subsidies to Tkachev Agrocomplex Company Ltd., or approximately 20% of all agricultural subsidies in the Krasnodar region.  To be fair, this is not uncommon, and other major agricultural holdings in Russia receive significantly larger subsidies.

Russians Renounce Responsibility for the Country

Citing the Levada Center research institute, Kommersant reports that only a third of Russian citizens feel responsible for the developments in their country. However, a full 22% consider their responsibility to be insignificant. As many as 64% of the surveyed stated that they feel no responsibility for the fate of their land whatsoever.
Only 22% of the surveyed Russians believe that it is possible for them to influence the society they live in, while a full 73% feel that such a possibility doesn’t exist at all. Sense of control grows as the focus narrows: 42% of the surveyed feel they’re able to control the situation in their city or region.  The same percentage of Russians believe they have the situation at work under control.
In a separate survey, Russian Public Opinion Research Center VTsIOM found that only 26% of Russians believe that their country belongs to the group of major powers. A majority of the surveyed consider the welfare of citizens as the main characteristic of a major power. At the same time, a non-profit organization “Public Opinion” found that 48% of the surveyed citizens are interested in politics, a record-high figure since 2001. As many as 60% of Russians believe that their government is running a successful foreign policy.

Bentley and Lamborghini Sales in Russia Grow by More Than 20 Percent

Between January and May 2016, British luxury car maker Bentley sold 114 vehicles in Russia, a 27% increase over the same period last year.  Most of the cars were sold in Moscow and the surrounding region (73).

Italian car maker Lamborghini is also doing quite well in Russia: while its worldwide sales in the first half of 2016 increased by mere 7%, Russian sales grew by 20% compared to the same period last year.

Overall car sales in Russia in the first half of 2016 fell by 14% .