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Russia's WTO accession was supposed to showcase the government's commitment to increasing competition in the economy. However, the state is taking ever-greater control in the banking sector, and news of the exit of Sweden's Handelsbanken, added to Okritie's takeover of Nomos Bank, only serves to further illustrate the consolidation.

With assets growing half as fast as in the boom years, competition has increased, but the dominance of the three big state-owned banks: Sberbank, VTB and Gazprombank, means that foreign lenders have been abandoning the market in droves. The foreign investors are clearly unable to compete with the state behemoths, which enjoy considerable advantages in the cost of funding, not to mention market power and access.

Handelsbanken is the latest to join the exodus, announcing on September 3 that it is leaving Russia. The Swedish bank joins larger names such as HSBC, Barclays and Swedbank in pulling out over the last 18 months, writing off hundreds of millions of dollars in the process.

The Swedish bank's exit comes only a week after Nomos, Russia's second largest privately-owned bank, announced it is to sell up to mid-ranked Otkritie Financial Company, much to the chagrin of Nomos minority investors. Nomos floated in London just over a year ago and was welcomed by international investors as the only medium-sized listed lender in Russia offering exposure to the dynamic banking story. The other listed banks are either state controlled giants or too small to make a splash, points out the Financial Times.

Although at $14 Otkritie is offering a 33% premium on the current market price, the deal will still mean a 15% loss for minorities who bought the bank at its IPO for $17. More importantly the deal effectively shuts portfolio investors out of the Russian banking sector, save for Sberbank and VTB.

An unnamed source close to Nomos owner Alexander Nesis told Vedomosti "the Russian financial market is monstrously deformed. It's difficult to compete with the state banks and the banking business is becoming less attractive. Returns are much higher in industrial assets." Nesis says he wants to concentrate on the rest of his ICT Group - which holds assets including metals and mining, heavy engineering, logistics and construction - while he will retain a stake in Otkritie, which plans to list in three years or so.

However, as one investor complained to the FT: "It's just a big joke. They did the IPO at $17 and now they are buying at $14. Then they are going to repackage it again and sell it at a higher price ... I don't see why anyone would want to buy it again."