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ACCORDING TO YURI Trushin, chief executive officer and chairman of the board of Rosselkhozbank (Russian Agricultural Bank or RAB), the bank’s mission statement is a simple one: "We’re the gene fund for Russia." As mission statements go that’s a pretty dramatic one.
It’s a measure of the political importance of the bank’s role in reviving rural Russia – home to 25% of the country’s 140 million population – that RAB was created barely three months after president Vladimir Putin came to power at the start of 2000.
It’s an even greater measure that having been created with just $11 million of seed capital from the government, the bank has now grown at breakneck speed to become one of the country’s top 10 banks. It now boasts a $15 billion balance sheet, $1.2 billion in equity capital, $9 billion in assets and 1,000 offices spanning the length and breadth of the Russian Federation. As a result, it now employs 12,000 employees, up from 5,000 in 2005. What’s more, there is no sign of any easing of the bank’s steep growth trajectory. "We’ve had fourfold growth in each of the last two years," says Trushin.
The 1990s were not a good time to be living in the Russian countryside, with the break-up of the collective farms, crumbling infrastructure, a collapse in agricultural product prices and high levels of unemployment among those who decided to stay on the land rather than make the long trek into Russia’s cities. Whole areas of the country survived solely on the back of barter trade. "The 1990s demonstrated to people in the countryside that the state wouldn’t be supporting them," says Trushin. "But here in Russia we have enough natural resources for people to support themselves."
Ironically, while most of western Europe has been worrying about energy security – and in particular the wisdom of dependence on Russian oil and gas – Russia has been worrying about food security and its own dependence, albeit a declining one – on food imports. The once dire food supply in Russia, with the country reliant on handouts from sometime ideological foes in Europe and the US, has now improved greatly, says Trushin. "We are long past the bottom of the agricultural crisis in Russia. For example, the country has been a net exporter of grain for seven years, exporting 10 million tonnes in 2006 alone."
And while there is no shortage of oil and gas in Russia, another key driver of agricultural production in recent years has been the desire to develop alternative energy sources, principally biofuel. As a result, contrary to many people’s expectations, rural Russia is proving a profitable place to operate. "The Russian countryside is not the financial black hole you might think it is," says Trushin, adding: "The non-performing element of our loan portfolio is only 1%, less than half the national average." So while RAB has been good to rural Russia, rural Russia has clearly been good to RAB. "We’re now the seventh-biggest bank in Russia – in two years’ time we’ll be one of the five biggest in the country." And looking further ahead? "Agroprombank used to be the biggest bank in Russia, bigger even than Sberbank," says Trushin, referring to the Soviet-era agricultural finance institution and displaying the fact that there’s no lack of ambition at RAB. Sberbank’s chairman, Andrei Kazmin, clearly has a rival for the top dog position in the Russian banking market.
Support from the top
What lies behind the dramatic rise of Russian Agricultural Bank to prominence, and can it continue? Clearly, the whole-hearted support of Putin has been a key factor. The bank’s supervisory board members include Alexey Gordeev, Russia’s agriculture minister, and several senior directors from the finance, economic development and trade ministries, as well as the federal property management agency. Political symbolism apart, the government has also stepped up to the plate financially, injecting fresh capital into the bank no less than eight times since 2000. One of Russian Agricultural Bank’s principal competitive advantages is that it in 2006 it was chosen to be the key agent of the National Priority Project for Agribusiness Development, initiated and supervised personally by Putin. RAB implements 85% of the project’s funding requirements, which totalled Rb70.5 billion ($2.74 billion) in 2006, and also extends 75% of the subsidized loans disbursed under the project.
Servicing the financial needs of the rural population across the length and breadth of a country that spans 11 time zones requires an extensive distribution network, and its expansion is a key priority. At present RAB and its subsidiary, Chelyabinsk Commercial Land Bank, has the country’s second-largest network, comprising 1,000 outlets. According to the bank’s strategic development plan, that is set to reach 1,500 by the end of 2007. It’s in stark contrast to the 1990s when rural Russia became a virtual banking desert as most commercial banks concentrated on servicing the needs of the country’s growing urban centres. "The rural areas of Russia were devoid of any rights of access to finance – there were virtually no banks at all in the countryside," says Trushin. RAB has now completely changed that situation and is reaping the benefits of the upturn in Russia’s rural economy. The bank’s core clientele is the country’s 17 million small and medium-sized farms and farmers, to which the bank has granted more than 130,000 loans. "There’s never been such lending to these 17 million people," says Trushin. "But even if we worked flat out for the next 10 years we still wouldn’t reach half of them."