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. Last Updated: 07/27/2016

Citibank Opens First Moscow Outlet

MTPeople walking past the Citibank outlet on Paveletskaya Ploshchad on Wednesday.
Citibank on Wednesday opened its first retail outlet in Moscow, a move that will allow the average Russian to open an account with the U.S. banking giant.

Citibank's president for Russia Allan Hirst said the bank, which has nine years of experience on the Russian corporate market and has been preparing to open the outlet for two years, was impressed by the country's growing economy and middle class.

"The progress has made it possible for Citibank to bring here the same kind of services that we offer to over 100 million clients all over the world," he said.

With assets of $1.7 billion as of July 1, Citibank is the largest foreign bank in Russia and 10th largest overall, according to the Interfax Rating Agency. It also leads foreign banks in lending volumes, with $1.1 billion in outstanding loans to Russian companies.

"It is certainly a landmark for the Russian market that such a big player after years of doing corporate business in Russia decided to launch retail operations," said Andrei Ivanov, an analyst with Troika Dialog. "This will make Russia more attractive for other global players, too."

Citibank offers some of the lowest interest rates in the market. The bank is paying between 1 percent and 1.23 percent annually on dollar deposits of $3,000 or more and 2.68 percent on euro deposits of the same amount.

For annual ruble-denominated deposits, the bank is offering 12.02 percent to 12.22 percent interest on minimal deposits of 100,000 rubles ($3,140), which is 2 percent below the inflation rate forecast for 2002.

Nandan Mer, consumer business manager for Citibank Russia, said the bank is offering services that are either unique or difficult to find in the market.

The bank has full-scale automated teller machines that allow customers not only to withdraw cash but also make deposits, he said.

Citibank is also offering 24-hour banking via the Internet and ATMs, in addition to traditional services such as cards, savings accounts, deposits and transfers and bill payments.

"The bank does not set any minimum income for potential clients, and we also don't require any fixed amount to be put on the account," Mer said, adding that a passport and documents to show that the initial deposit was earned legally are the only paperwork needed to open an account.

Russia is several years behind other East European countries in consumer banking, with Hungary and Poland leading in total deposit volumes.

Citibank launched retail operations in Hungary in 1995 and as of January 2002 had $794.8 million in retail deposits. By comparison, the bank had only $20.8 million in retail deposits in Russia as of July 1.

Top Foreign Banks
in terms of retail deposits
*$ million
Raiffeisenbank 228.2
International Moscow Bank** 205.9
ING 25.5
Dresdner Bank 21.6
Citibank 20.8
DeltaBank 3.2
*Data as of July 1
**98 percent of IMB is owned by European banks, with 43 percent held by HypoVereinsbank (Germany). Other shareholders are Nordea Bank Finland PLC, BCEN-Eurobank (France), the EBRD and Mizuho Corporate Bank (Japan). The Central Bank owns 2 percent of IMB.
Source: Interfax Rating Agency

Other foreign banks have been enjoying the growing wealth of the Russian population, with Austria's Raiffeisenbank, which has six outlets in Moscow, leading in retail deposits. As of July 1, Raiffeisenbank had $228 million in retail deposits, almost half of the $547 million accumulated by the eight leading foreign banks together, according to Interfax Rating.

But this amount is only a fraction of the $20 billion in retail accounts at state-controlled Sberbank, the country's largest retail bank.

"I don't think that our new product will affect the monopoly of Sberbank, but competition is always good for the market and for customers," Hirst said.

Michel Perhirin, chairman of the board of directors at Raiffeisenbank, said: "It is definitely good for Russian customers to get an alternative and choice -- be it from a Russian or foreign source."

He also said that the local market differs greatly from Eastern Europe.

"In Russia customers are more product-oriented, whereas in Europe they are more service-oriented, which means the Russian market is lagging behind and less developed," he said. "Still, the Russian market dynamics are more remarkable and escalating."

Mikhail Matovnikov, deputy director general of Interfax Rating, said Citibank's retail launch means more competition for other foreign banks, specifically Raiffeisenbank.

"Both banks are targeting the same client base, which is the middle class and top managers who care about the reputation of the bank rather than financial attractiveness," he said.