Sberbank Russia OJSC history, profile and corporate video
Sberbank Russia OJSC provides commercial banking and financial services in Russia. It provides a broad range of banking services to retail clients, including deposits, various types of loans as well as bank cards, money transfers, bank insurance and brokerage. The company is engaged in international activities through direct settlement agreements, correspondent accounts, trade finance operations and membership in a number of international financial organizations. Its banking services include retail banking, corporate banking and financial markets. The retail banking activities involves in retail current accounts, term deposits from individuals, consumer loans and mortgages and debit and credit cards. The corporate banking comprises corporate accounts, corporate deposits, overdrafts, loans and other credit facilities and trade finance. The financial markets involves in operations with securities, operations on money markets, long term funding received on capital markets and foreign currency and derivate. The bank operates through the following business segments: Moscow, Central and Northern Regions of European Part of Russia, Volga Region and South of European Part of Russia, Ural, Siberia and Far East of Russia and Other Countries. The company was founded in 1841and is headquartered in Moscow, Russia.“
Emperor Nicholas I established the first private savings institutions in Russia in 1841 when he approved a statute “for the purpose of providing a means for people of every rank to save in a reliable and profitable manner”. The next year, savings offices opened in the state treasury departments in Moscow and St. Petersburg. Over the next 20 years, about 45 such offices opened in nearly all of Russia’s regional capitals. The State Bank of Russia, or Gosbank, was formed in 1860 and the savings offices were soon transferred under its jurisdiction.
Early Soviet period
By 1924, the chervonets pushed out the old Soviet banknotes and became the sole currency. The State Bank of the USSR, or Gosbank, was established in 1923 and the network of savings banks was reconstituted. Encouraging savings was a government priority in the late 1920s. The state targeted the general public with the magazine Sberegatelnoe Delo, or “Savings Business“, which contained articles by leading government planners.
Control of savings banks was transferred to the People’s Commissariat of Finance in 1929. The first Five-Year Plan of 1928-32 set ambitious targets for the promotion of personal savings, but the plan was only about 50% fulfilled because few people had any money to save. The situation improved under the second Five-Year Plan. Total deposits grew five times between 1935 and 1940 and reached prewar levels. Meanwhile, the Credit Reform of 1930-32 led to the formation of a system of specialized banks under Gosbank, each with a particular sphere of responsibilities. This system remained basically unchanged through most of the Soviet period.
The savings banks played a large role in funding Soviet involvement in World War II. Not only did they provide loans to the war effort, they also accepted donations from the populace for the defense effort and sold tickets for government-run lotteries that raised money for the war. A rationing system was in place during the war; in 1947, it was repealed and a money reform was carried out in which ten old rubles were exchanged for one new ruble. Those who put their money in savings banks, however, enjoyed a more favorable exchange rate. The network of savings bank branches, which had fallen by half during the war due to occupation of Soviet territory, returned to prewar levels by 1952. There were about 42,000 branches in all. They remained under the jurisdiction of the Ministry of Finance, with soviet committees supervising local offices.
1960s: Incorporating Sberbank into the Gosbank
Savings offices were transferred to Gosbank, the state bank, in 1963. Gosbank now operated as simply an extension of the government’s monetary and economic policy. It carried out all the functions of a central bank as well as a commercial bank: printing money, controlling the money supply, providing credit for industrial enterprises, operating private savings accounts for individuals, and taking care of the accounting and money transfer needs of the federal budget. Citizens brought their money to Gosbank’s savings offices because they had no other option. In 1965, economic reforms were implemented to improve planning and make industry more responsive to demand, but the banking system remained fundamentally unchanged.
In the mid-1980s, Mikhail Gorbachev launched a policy called perestroika which was economic restructuring; Deposits at savings institutions began to increase and a major reorganization of the banking system was implemented in 1988. Gosbank was turned into a central regulatory institution, while five separate banks were created specializing in particular economic spheres such as foreign trade, agriculture, and loans to industry. One of the newly created banks was Sberbank, responsible for operating a savings and loan system for workers and average citizens. Sberbank was structured as an umbrella institution for the fifteen savings banks of the USSR’s republics.
Dissolution of the USSR
In 1990, as the Soviet Union was falling apart, Boris Yeltsin, president of the Russian Republic, signed a presidential decree declaring the Russian Republic Savings Bank (a unit of Sberbank) to be the property of the republic. Yeltsin worked with the bank’s chairman, Pavel Zhikarev, to privatize the Russian Sberbank in 1991. It was organized as a joint stock company comprising about 76 regional banks, each with its own particular way of operating. Price controls on consumer goods were removed in 1992, leading to rapid inflation; Sberbank froze depositors’ accounts early that year to prevent further growth in the money supply. In 1993, Zhikarev, who had been the bank’s chairman for 25 years, was replaced by the deputy chairman Oleg Yashin. The Russian Central Bank acquired a majority stake in Sberbank by 1993. The Central Bank and the Finance Ministry made attempts to acquire nearly full control over Sberbank in the early years of its existence, but in the end parliament determined that it should remain an independent entity. Full privatization was postponed indefinitely in 1995 when rumors surfaced that a Russian tycoon with a failed bank in his past was planning to gain control of Sberbank.
The newly privatized Sberbank was a sprawling entity with over 20,000 branches and nearly 90% of household savings. Although it paidinterest rates that were often lower than the rate of inflation, Russians who wanted a bank account continued to deposit their money in the familiar institution. Many citizens preferred to keep their savings at home in US dollars. Sberbank was saddled with some unprofitable operations, such as the processing of payments for public utilities and the operation of branches in provinces that were served by no other bank.
Meanwhile, during the 1990s, Sberbank was modernizing and adding services. It signed deals with Hewlett Packard and Unisys in 1994 to computerize all its branches and implement a central clearing system. Its first ATM opened that year at Moscow’s Sheremetyevo airport. Sberbank was also remodeling some of its branches in marble and glass in order to dispel their reputation for dinginess. In the mid-1990s, the bank started construction on a lavish new headquarters in the center of Moscow.
1998 financial crisis
Amid the 1998 crisis, the Russian government introduced a program allowing depositors at the largest banks, such as Inkombank, SBS-Agro, MOST-Bank, and Menatep, to transfer their accounts to Sberbank and take advantage of the government deposit guarantee. However, dollar accounts would be transferred at an unfavorable rate based on the pre-crisis value of the ruble. Sberbank gained about 440,000 new accounts, moving its share of individual accounts to about 85% and of corporate accounts to 20%. After the crisis, Sberbank continued to shift its focus away from GKOs and toward investment in the private sector of the economy. Its loan portfolio increased between two and three times in 1999 as it lent large amounts to oil, natural gas, and mining concerns.
Volksbank International acquisition
In 2011, Sberbank acquired Volksbank International AG from its shareholders Österreichische Volksbanken AG, BPCE, DZ Bank and WGZ Bank. The deal is including all VBI assets – banks in Slovakia, Czech Republic, Hungary, Slovenia, Croatia, Ukraine, Serbia and Bosnia and Herzegovina, but excluding Volksbank Romania. The agreed price is €585 to €645 million, depending on VBI business performance in 2011. VBI’s total assets (excluding Romania) was €9.4 billion in June 2011.
8 June 2012 in Istanbul, Sberbank of Russia (“Sberbank”) and the shareholders of DenizBank AS (“DenizBank”) – Dexia NV/SA and Dexia Participation Belgium SA (together, “Dexia”) have signed a definitive agreement for the acquisition of 99.85% of DenizBank by Sberbank for a consideration in Turkish Lira of TRY 6,469 million (at the current exchange rates approximately EUR 2,821 million or US$3,504 million). This implies a valuation of Turkish Lira 6,479 million for 100% of DenizBank’s share capital. The transaction includes DenizBank and its subsidiary companies in Turkey, Austria and Russia. The agreed purchase price is equivalent to 1.33x DenizBank’s shareholders’ equity as of 31 March 2012 and is subject to adjustments at closing.”
*Information from Forbes.com and Wikipedia.org
**Video published on YouTube by “Sberbank“