BANK OF CYPRUS is quietly confident that its entry into the Russian market last year would make a bigger, significant contribution to its profits in 2009.
Russia’s economy “is strong, it has good fundamentals, and if the recent rise in oil prices develops into a trend, this will help them towards recovery”, a senior BoC source told the Cyprus Mail yesterday.
Asked whether the forecasts of negative growth in Russia in 2009 and only modest positive growth in 2010 would affect BoC’s strategy, the source said that, given the bank’s very low penetration in the huge Russian market, Russia’s overall growth rate was not so important.
“What is important is that the bank feels that it can take on reasonable risks and extend loans in Russia. These days, one cannot say that there is more risk in Russia than in Greece or Cyprus, so everyone is facing the same global economic problem. Consequently, we apply to Russia the same principles of risk monitoring and management, and key lending criteria, as to any market we are in”, he said, adding: “We just have to show the same care in Russia as we would any other country.”
At its AGM on Wednesday, BoC announced that, although it is difficult to give precise estimates in the present financial environment, it expects its profit after tax to drop to €300-400 million in 2009.
BoC reported a net profit of €502 million for 2008, a 4.0 per cent increase on the previous year, but significantly less than the €540 million it had forecast as late as November 2008.
The bank now has branches in eight countries, and expects a positive contribution this year from its new markets in Ukraine, Romania, and particularly Russia, where it acquired 80 per cent of commercial bank Uniastrum Bank last year.
Another source in BoC told the Cyprus Mail that, given the huge size of the Russian market, expanding there is not going to be a straightforward task. Although potential corporate customers are relatively easy to find and would probably be familiar with what a Cypriot bank and BoC in particular can offer, retail customers pose a challenge in terms of language, consumer psychology and cultural attitudes to banks.
For this reason, BoC strategy will be to continue marketing in Russia through Uniastrum Bank, and will address the question of using the BoC brand there at a later stage.
BoC will report its results for the first quarter of 2009 on 28 May.
