Written By When most companies think of entering the Russian market, they likely have visions of risky investments and even bigger losses. But for Raiffeisen Bank International (RBI), an Austria-based bank, their foray into Russia was a success story. By taking calculated risks and focusing on developing relationships with local partners, RBI managed to turn their Russian expansion into record profits in 2014. In this blog post, we’ll explore the journey that Raiffeisen Bank took to avoid disaster in Russia and generate extraordinary results.
The History of Raiffeisen Bank
In the early 1990s, as Russia plunged into economic and political turmoil, foreign banks fled the country. But Raiffeisen Bank, Austria’s third largest lender, decided to stay put. It was a risky bet that paid off handsomely: today Raiffeisen is one of the most profitable banks in Russia, with a return on equity of almost 30%.
How did Raiffeisen manage to avoid disaster in Russia while other foreign banks were pulling out? First and foremost, it had a strong local partner: Russian businessman Mikhail Prokhorov, who later went on to become one of the world’s richest men. Prokhorov owned 25% of the bank’s Russian subsidiary when it was founded in 1996.
Second, Raiffeisen took a long-term view of the Russian market. It recognized that there was huge potential for growth, despite the short-term challenges. And so it invested heavily in building a nationwide branch network and developing its online and mobile banking capabilities.
Third, Raiffeisen adopted a cautious lending policy during the early years of its operations in Russia. This meant that it avoided many of the bad loans that crippled other banks during the financial crisis of 2008-09.
Today, Raiffeisen is reaping the rewards of its bold decision to stay in Russia. It is one of the country’s leading retail banks, with over 3 million customers. And its profit margins are enviable: last year it generated net income of
The Financial Crisis in Russia
The Russian financial crisis of 1998 was a major financial crisis that hit Russia and its economy hard. The crisis was caused by a number of factors, including the ruble’s devaluation, high interest rates, and non-payment of taxes and wages. This led to a decrease in foreign investment, as well as an increase in the country’s debt burden. The Russian government was forced to default on its debt, and this in turn led to a further decline in the value of the ruble and a further deterioration in the country’s economic situation.
Raiffeisen Bank’s Response to the Crisis
In the early 1990s, Raiffeisen Bank was one of the first foreign banks to enter the Russian market. At a time when most Western firms were fleeing the country due to political and economic turmoil, Raiffeisen saw an opportunity to provide much-needed banking services to a population that was largely underserved.
The bet paid off. Over the past two decades, Raiffeisen has grown to become one of the largest foreign banks in Russia, with over $10 billion in assets and nearly 200 branches across the country.
The bank has been especially successful in recent years, posting record profits even as other European banks have been retreating from the Russian market. In part, this is because Raiffeisen has been able to avoid many of the pitfalls that have plague
Record Profits
In the 1990s, Raiffeisen Bank was one of the first Western banks to enter the Russian market. At a time when many other Western banks were pulling out of Russia, Raiffeisen bank continued to invest in the country. As a result, when Russia’s economy began to rebound in the early 2000s, Raiffeisen bank was well-positioned to take advantage of the growing market. In 2013, Raiffeisen bank generated record profits of $1.4 billion. This was largely due to the bank’s strong presence in Russia, which accounted for about a third of its total profits.
Raiffeisen bank’s success in Russia is due to a number of factors. Firstly, the bank has been operating in the country for over 20 years and has built up a strong reputation. Secondly, it has invested heavily in technology and infrastructure, which has allowed it to offer a wide range of products and services to its customers. Finally, Raiffeisen bank has been able to attract and retain top talent, which has helped it maintain a competitive edge in the market.
Lessons Learned
In the early 1990s, Raiffeisen Bank was one of the first Western banks to enter the Russian market. At that time, the country was in the midst of a major transition, with the collapse of the Soviet Union and the introduction of market reforms. The bank was able to take advantage of this opportunity by investing heavily in the country’s infrastructure and by providing financing to Russian companies.
However, Raiffeisen Bank was not immune to the turbulence that characterized Russia in those years. In 1998, the country was hit hard by an economic crisis, and Raiffeisen Bank was forced to write off large losses. But thanks to its strong foundation and prudent management, the bank was able to weather the storm and emerge stronger than ever.
Today, Raiffeisen Bank is one of the leading banks in Russia, with a nationwide network of branches and ATMs. The bank has also been consistently profitable, even during periods of economic turmoil. This is a testimony to its sound risk management practices and its commitment to serving its customers well.
Conclusion
The success story of Raiffeisen Bank in Russia is an excellent example of how to manage risk. The bank took a calculated approach and was able to anticipate potential problems and protect itself from losses due to their foresight. By taking advantage of its global network, the bank was also able to leverage new opportunities for growth. As a result, it has enjoyed record profits in recent years despite the chaos that engulfed many other banks during this period. This case study provides valuable insight into how businesses can effectively balance risk while still achieving great success in difficult markets like Russia.
