The growing trade links between Russia and Serbia are likely to lead to a greater Russian presence in the Balkan country’s banking sector. That is the view of Alexei Sytnikov, vice-president of Bank of Moscow, Russia’s fifth-largest banking group by assets, which has established a wholly owned subsidiary in the Serbian capital Belgrade with an initial investment of €15 million. "We believe that the probability of other Russian players entering the Serbian market is very high," says Sytnikov, who is responsible for Bank of Moscow’s international banks. He adds that all the prerequisites for Russian banks, most likely from among the top 30 players, are in place for them to look to set up subsidiaries in Serbia – strong economic growth, a relatively low level of competition in the financial services sector and a growing Russian business presence.
As Sytnikov points out, Serbia’s economy continues to grow strongly. GDP growth in 2007 was 7.5%, exceeding the 5.7% figure for 2006. And in the first quarter of 2008, he says that the country established itself as the regional leader in the Balkans in economic growth terms, with GDP rising by 8.2%. And with more than 7 million inhabitants, Serbia is the most populous of the former Yugoslav republics, making it an attractive market from a retail banking perspective. On the business front, Sytnikov says that Russian companies are forging stronger links with Serbia, with trade in commodities, for example, expected to reach $4 billion this year, double the level recorded in 2005. The most notable Russian participation in the Serbian economy to date has been the sale of a majority stake in Serbian oil and gas company NIS to Gazprom.
Although Bank of Moscow had initially planned to acquire an existing bank, it ultimately decided that a greenfield strategy was the most cost-effective way to enter Serbia.
Sytnikov says that Bank of Moscow already has a history of successful start-ups abroad, pointing to the fact that its subsidiary in Ukraine established in 2006 reported a profit in its first year of operations despite fierce competition. With regard to the bank’s market focus in Serbia, Sytnikov says: "At first, we plan to develop operations with corporate customers, and in two to three years will start doing retail business."
Previously, Bank of Moscow had limited its overseas expansion to states that were formerly part of the Soviet Union, with operations in Belarus, Estonia, Latvia and Ukraine.
As for further expansion in central and eastern Europe, Sytnikov says: "So far, we have no specific plans to enter other central and eastern European markets. However, we are carefully monitoring the market environment in the region.’’