BNP Paribas steps back from Russian business

BNP Paribas is to hive off its Russian consumer credit business into a joint venture with Sberbank, the country’s biggest bank in terms of assets, as the French lender exits branch-based business in Russia.

The French bank announced in September that it would end its independent retail activity in Russia, involving the closure of 20 branches mostly in the Moscow region, but would continue offering consumer credit and mortgages through the joint venture with Sberbank.

The two banks on Wednesday announced the details of the agreement, under which Sberbank will have a 70 per cent stake in the joint venture, and BNP the remaining 30 per cent.

BNP will retain its investment banking operations in the country.

Its decision to end its independent retail banking presence mirrors recent moves by Barclays and HSBC, which have also withdrawn from the Russian retail market which is dominated by state-affiliated banks.

However, France’s Société Générale aims to expand its Russian banking operations through the recent merger of its Rosbank and BSGV subsidiaries.

Sberbank and BNP said their joint venture would initially apply to consumer lending at the point of sale, mainly in car showrooms and shops where credit is attached to a specific purchase. BNP has 4 per cent of this market in Russia, through its Cetelem consumer credit business, and the joint venture is aiming for an eventual 25-30 per cent share within three to five years.

BNP hopes that the venture will eventually also serve customers through Sberbank’s network of 19,000 retail branches.

The French bank’s €800m existing Russian consumer loan portfolio will stay out of the joint venture but future lending will be done via the joint venture, BNP said.

BNP’s Cetelem is the seventh largest consumer credit lender in Russia terms of the value of loans given at point of sale.

Thierry Laborde, BNP’s head of personal finance, said in an interview with Les Echos, the French daily, that although the French bank owned a minority in the joint venture, it retained a right of veto over key posts, including chief executive and risk officer.

Spinning off assets into the joint venture will help BNP reduce its risk-weighted assets, helping to meet tougher capital regulatory requirements which come into force in June 2012.

BNP and Sberbank said they aimed to finalise the agreement in mid-2012.