UralSib looks to the regions for growth
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UralSib looks to the regions for growth

The flight of the Russian phoenix

Pharos sheds light on Russia’s recovery

When the Russian government defaulted on its debt in 1998, the country’s banks, with one or two honourable exceptions such as Alfa Bank, followed suit too. Many of them had played fast and loose with their depositors’ money, effectively betting their customers hard-earned roubles on high-yield, high-risk investments in the bond and foreign exchange markets. When those bets failed to pay off, many banks were bankrupted overnight and millions lost their life savings.

A look at the banking sector today reveals an altogether different picture, with the vast majority of banks focused on serving the everyday needs of retail and corporate customers, rather than acting like wannabe hedge funds. Given the strong economic growth of recent years – GDP growth has averaged more than 7% since 2000 – both corporate profits and individual incomes have risen sharply, boosting banks’ balance sheets and their confidence in lending to the real economy. Much still remains to be done, however, and the name of the game for banks in the coming years will be to expand the scale and scope of their operations.

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