State controlled Russian investment banks of President Vladimir Putin are bullying foreign competitors out of the market, as they are buoyed by a bailout from its Russian tycoon cartel.
The country's largest lender, OAO Sberbank and VTB Group have reported a five-fold increase in income from investment banking fees since 2005. This conclusion was reached from data compiled by Freeman & Co of New York. On the other hand, European banks such as UBS AG, Deutsche Bank AG and RBS Group Plc have lost their market share in the same period.
The Russian banks have turned inwards, as their credit line abroad have remained frozen since the collapse of Lehman Brothers Holdings Inc. President Putin's pledge of US $200 billion in loans and tax relief for allies who own strategic businesses has helped these banks to remain ahead of its foreign counterparts. Companies such as United Co Rusal of Oleg Deripaska and Evraz Plc of Roman Abramovich has benefited from this program. From there, Sberbank and VTB leverages follow-up businesses for the firms that benefit from the bailout.
According to Todd Berman, Head of Investment banking at Sberbank, "Russian clients have realized that Sberbank stood firm and we are benefiting from that continuity now as many of the international banks continue to struggle. Real relationships are truly tested in difficult times and it's clear that many international banks here and elsewhere were found wanting during the economic crisis."
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