German Gref talks banking to business leaders

20 May '08
More than a hundred industry leaders from Moscow and other regions met in the conference hall of the Ararat Park Hyatt Hotel, Moscow on Friday, May 16 to listen to German Gref, the new president and chairman of the board of Russia’s largest financial institution, Sberbank. The meeting was sponsored by the American Chamber of Commerce.

Gref’s comments focused on three issues: the future development of the financial sector of the Russian economy, the risks of a financial crisis in Russia and Sberbank’s expansion strategy.

Gref began by saying that he felt “the Russian economy is no longer weak. Our economic power and financial potential will continue to increase dramatically, especially in the nearest five years.” Russia’s future position in the world economy will depend on the “microeconomic politics of the government” which Gref hoped would remain essentially the same. He added that some investors still aren’t sure about Russia’s success and are planning to wait five to 10 years. But if they wait this long, they will “…miss the opportunity and be far less successful in Russia then their competitors”. Up to 2020 Russian will become “one of the weightiest economies” in the world, he continued, explaining that the US share of the world economy will be decreasing. Gref also said that Russia’s economy will trend 2-3 times higher than other developing countries.

Gref also spoke about the inevitability of Russian-American economic cooperation. “Some people still don’t understand this, but it’s their own problem,” he said.

Concerning the credit squeeze in the financial markets of Western countries, Gref said it was due to “overly excessive” capital speculation. Russian business and government authorities have avoided such risks and the banking crisis has made them even more aware of not making similar mistakes. He also predicted that banking services in Russia would become less expensive due to competition in the market.

After serving under former President Putin as Russia’s Economic Development and Trade Minister, Gref said he felt lucky to find himself working as CEO of Sberbank because he enjoys working in such a competitive financial sphere.

In his hour-long speech, Gref also talked about the problems of inflation and rising prices and felt that handling them administratively wouldn’t solve anything—that only market competition could keep things on an even keel.

As to Sberbank’s future, Gref said that the bank is preparing to embrace modern IT to help move the bank into the 21st century. The goal for the next five years is to grow Sberbank into one of the “top ten” largest banks in the world, Gref said, adding that smaller Russian banks will be forced to merge, be acquired or not be able to survive.

Russian newspapers have recently reported that as more money is pumped into investment projects financed by the government, inflation will increase. To deal with this, the Ńentral Bank of Russia will make the cost of money to commercial banks more expensive. With less to lend, only the strongest, largest banks will be able to be develop their loan portfolios.

By Svetlana Zabalueva, editor, Marchmont’s Investment Guide to Russia
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