Crisis, shmisis

By bne IntelliNews November 27, 2009

Ben Aris in Moscow -

The crisis has hurt Russia's banks, but for the specialists things aren't as bad as you might think. James Cook is a doyen of Russia's banking industry and the founder of Aurora, a private equity fund with a big exposure to the sector.

With investments into DIY, a financial supermarket called Kreditmart and a stake in Unistream Bank, Cooks says that the crisis for him hasn't so much depressed business, as moved it about. "True that the consumers are borrowing less, but they are still spending money. It is just they are being more care about what they are spending it on," says Cook, sitting at a table in the Tibetan restaurant at the foot of his office building. "For example, Superstore (DIY), one of our assets, just had one of its best months ever in August this year."

Mortgages are another important line for Aurora and Cook says that while many banks have cut their mortgage programmes in the last year, some 10 are still in the business. The difference is that they have become lot more conservative and demand higher up-front contributions from prospective borrowers. "There were no mortgage deals at all in the first quarter of this year, but in the second quarter things started to pick up. However, on September 1, we suddenly had a flood of applications for consumer loans and mortgages," says Cook. "The market is open again, but it will take about a year to get back to the pre-crisis levels of lending."

Still, oddly enough the cost of mortgage money has remained largely unaffected: prior to the crisis, the average rate on a mortgage was about 13%, and by the start of the autumn, the rate had risen to about 14% in dollars and 15-20% in rubles. "But this is the same rates as we had 10 years ago," notes Cook.

One of the more dramatic changes to mortgage lending is banks will now only lend to people who can prove their income (for example with tax returns). Many Russians moonlight or work in the grey economy and during the boom years, borrowers only had to prove they had an income; however, now banks are more concerned about their ability to recover bad loans, so they are demanding to see legitimate income before extending loans.

Even so, mortgages have also received a boost from the crisis. In the boom years, everyone was borrowing, so with volumes constantly rising the game was all about grabbing a piece of a growing pie. "Now that growth is going to be slower and a punter's credit quality is more important, some banks are hoping to capture clients with a mortgage," says Cook. "They hope to use their relationship to cross-sell their other products using the mortgage, which is the ultimate guarantee for all the borrowing."

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss