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Russian state giant Sberbank continues its expansion across market segments, finally wrapping up a JV deal with France's BNP Paribas to grab a slice of Russia's booming consumer finance market, it announced on September 5.

The new partnership, which will operate under the French bank's Cetelem brand name, is forged by Sberbank's acquisition of 70% of the Russian business for RUB5.1bn ($170m), with BNP Paribas retaining a 30% stake. The deal has been on the table for some time ? a non-binding memorandum was signed in June 2011 ? as the Russian giant has been eyeing the lucrative point-of-sale market.

The deal offers the struggling European bank the leverage to expand its POS operation, which currently holds 4.5% of the market, while adding another string to Sberbank's bow.

"Establishing the joint bank with Cetelem is the optimal way for Sberbank to gain a presence in the POS finance market remained one of the few significant financial markets where Sberbank did not work," said Denis Bugrov, Senior Vice President of Sberbank in a statement. "As of today Cetelem occupies a good position in the POS finance market with a 4.5% share, and the newly launched bank will allow us to initiate a strong development programme which will enable us to take up a leading position in the Russian POS market."

Consumer finance has been booming, and the lack of a presence at the cash register is undoubtedly a missed opportunity for Sberbank, albeit a relatively minor one. The joint venture is targeting a return on equity of 20% in the next two to three years, according to VTB Capital, and expects the POS segment to grow 15-20% year-on-year during the period. Longer term, Sberbank says it hopes to speed to become market leader with 25% inside the next three to four years. Apart from POS products, the new JV is to offer car loans, as well as credit cards and loans.

Alain Van Groenendael, Deputy CEO of BNP Paribas Personal Finance commented: "This major agreement on the fast-growing Russian market confirms the partnership capabilities of BNP Paribas Personal Finance. This joint venture with Russian No.1 banking actor consolidates the presence and the business of our group in this country on the long term. Our joint bank is now in a position to build more agreements with retailers and expand its ability to finance Russian raising consumption."

Analysts suggest Sberbank is likely to quickly snap up market share, but add that it may be a little late arriving to the POS party. VTB Capital says in a note: "The expansion in POS lending and the JV with Cetelem are in line with Sberbank's earlier guidance. We think that the bank will be able to reach its targets, as it has done in the credit card segment, where Sberbank became the leader in less than two years. Focusing on POS lending would support NIM and loan growth, although the size of the JV is insignificant compared with the bank's size. However, we note that the mass segment, which Sberbank is to enter is already overheated. We might therefore see a reduction in loan growth by 2012 year end, while intensifying competition could put pressure on NIM. All in all, we remain cautious on the deal. Currently, its valuation is unclear."

Since CEO German Gref took over, Sberbank has been slowly expanding its reach through a series of acquisitions and new foreign operations. It bought control of the eastern European operations of Volksbanken for 505m in February, and followed up with the purchase of Turkey's Denizbank in June for $3.5bn. The bank also looked hard at buying Kazakhstan's troubled BTA bank, but it seems that deal will not happen.

In addition, the bank has rolled out its own subsidiary operations in other countries of the Commonwealth of Independent States (CIS) and is already a major player on the Ukrainian market. Meanwhile, it moved into Russian investment banking with a splash in January, with the acquisition of Troika Dialog for a reported $1bn.

Russia's state own banks are becoming increasingly aggressive, and in Sberbank's case, more nimble, driving a de facto consolidation of the Russian banking sector that has mainly impacted foreign players on the Russian market so far.