HSBC to bank on Russia's proletariat

HSBC might claim to be the world's local bank but it takes a brave man to offer Russians a place to put their roubles.

The company is considering whether to offer retail banking services in Russia and will conduct a feasibility study next year. It already offers corporate banking to multinational clients with offices there, and a number of Russian companies.

But the retail banking industry is under- developed and Russians tend to keep their money under the mattress – which means there is plenty of opportunity for growth.

The most daunting prospect is the dominance of the incumbent Sberbank, which holds around 80 per cent of the country's rouble deposits and 60 per cent of the dollar savings, according to HSBC figures.

Another concern is organised crime. On Thursday the finance director of the oil company Lukoil, Sergei Kukura, was kidnapped by masked men armed with Kalashnikovs.

There are few Western banks in the Russian retail banking industry. The only substantial operator is Raiffeisen Zentralbank, an Austrian company, though Citibank is thought to be about to make a move.

"We will study the market next year and see if it is feasible," said Richard Tickner, the chief executive of HSBC Russia. "I'm optimistic that it will be."

The other hurdle is bureaucracy. "To get a retail licence is a long process but it's not impossible," he said.

Russia has a population of around 140 million, with many in poverty. Over the past two years, however, the economy has shown signs of revival, particularly through oil and metals exports. "In cities like Moscow and St Petersburg, the middle class is well educated, young, quite well paid, and has a need for sophisticated banking services," said Mr Tickner. "There are many social problems, but what we would focus on is the young generation and the future of Russia."

Meanwhile, rumours that HSBC might try to acquire Fleet Boston Financial Corporation have been doing the rounds. However, HSBC has been badly burnt by the financial crises in Brazil and Argentina and the US bank has more exposure than most. HSBC declined to comment.