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. Last Updated: 07/27/2016

Moscow Banks Rush to Tap Regions

Leading Moscow banks, seeing no more growth potential in the competitive capital, are racing to expand in the untapped markets of the Russian regions.

The size of the regions means local banks do not fear the newcomers, and local authorities and companies often prefer to deal with strong Moscow banks rather than weak regional institutions.

"Moscow is a very narrow market, it is a financial center," Uneximbank Deputy Chairman Igor Antonov said. "The future is in the regions. Moscow will remain a financial center, but real money will be earned outside Moscow."

Only four non-Moscow banks now make it into the rating agency's list of the top 30 Russians banks in terms of assets. Two of them are in St. Petersburg.

Moscow was once the heart of the Russian economy while the regions, crippled by non-payments and falling industrial output, remained on the fringes.

But the situation has changed, bankers said. "The worst time for the regions is over. Take any big producer. They have separate divisions making competitive goods and you can grant them a credit," Antonov said.

At the same time banks can earn a better return on funds in the regions than in Moscow, where competition has pushed down margins, bankers said.

Almost all the big Russian banks have a presence in St. Petersburg, Nizhny Novgorod and Yektaterinburg. But now they are looking further afield.

Bank Rossiisky Kredit, one of the Moscow banks leading the thrust into the regions, believes the Urals and Siberia have the best prospects, said Dmitry Dorofeyev, head of planning the bank's regional expansion. The industrial production crisis will be over relatively early in these regions because of their competitive companies, he said.

The most interesting cities for the bank are Chelyabinsk and Yekaterinburg in the Urals, Vladivostok and Khabarovsk in the Far East and Krasnoyarsk in Siberia, he said.

Inkombank, another leader in regional expansion, has 50 regional branches and has applied to open six more, a bank spokesman said.