Russian banks come with high price tag

RUSSIA’S RETAIL BOOM means that banks offering consumer finance services are posting impressive growth. This is attracting intensifying interest from foreign suitors. Although many domestic banks are keen to bring in foreign know-how and raise their capitalization, few shareholders want to relinquish control, as further upside is expected over the next few years. The dearth of available banks means that in turn valuations have been pushed up as controlling shareholders put a premium on their holdings. Foreign banks keen to tap into the lucrative retail finance market by buying a local player might therefore have limited acquisition options until at least the medium term, bankers say.

Although some foreign banks have already made acquisitions, cross-border M&A has been muted. Until Raiffeisen’s $550 million purchase of Impexbank in early 2006, the Austrian bank and the other leading foreign retail player, Citibank, had rolled out greenfield networks. But the...