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. Last Updated: 07/27/2016

Absolut Thinks Big with a New Owner

Absolut Bank, under the new ownership of Belgium's KBC Group, said Tuesday that it could rely on funding from its parent company to shelter it from the effects of the global financial crisis.

In a bullish presentation on its new strategy for Russia, Absolut, one of the country's 25 largest banks, said it hoped to net 10 percent of market share in the banking sector.

Spurred by a fast-growing economy and relatively low penetration in retail banking, Absolut is looking to open 80 new offices and boost its presence to 25 regions across Russia, from 18 currently, in the next three years.

The bank's management shrugged off concerns that the global financial crisis, which many analysts are predicting will lead to a slowdown next year in the banking sector, will have any impact on its ambitious growth targets.

"[Absolut's] growth has been very rapid," KBC chief executive Andre Bergen said. "Even if there is a slowdown, it will be from very high rates. We are here for the long-term. If there is a slowdown over the next one or two years, then so what?"

KBC, Belgium's second-largest bank, has pledged to invest at least 225 million euros ($318 million) in equity funding to push Absolut's growth over the next two years.

"During times of turmoil on the market, we have pretty stable financing. We can rely on financing from our parent company," Absolut chief executive Nikolai Sidorov said. "Funding on international markets has been replaced by funding from our parent company."

Sidorov predicted that the bank could even benefit from the crisis. He noted that some banks had stopped issuing loans, particularly mortgages, and said Absolut was well placed to step in, and could increase its loan portfolio by a higher amount than envisaged.

He added that the bank would consider acquiring credit portfolios from banks hit by the global financial crisis. "But the important thing is the quality of these portfolios," said Sidorov. "We won't buy low-grade portfolios. We never did it before, and we won't do it in the future."

Since its acquisition by KBC, Absolut has remained one of the most stable banks providing a plethora of services from car loans to credit cards, analysts said.

"Absolut Bank is in the single digits [among Russian banks] on credibility and stability and credit worthiness," said Ivan Manayenko, banking analyst for Veles Capital. "It has strong showings, ranking sixth in both its consumer and mortgage lending programs in Moscow."

Maxim Osadchy, senior analyst with Antanta Capital, said that while Absolut Bank had enough assets for a push into the regions, it would need to expand its investment further to get ahead of the competition. "Absolut Bank needs to invest at least 1 billion euros ($1.4 billion) in order not to lag behind in its mortgage and consumer credit programs," Osadchy said. "Domestic competitors such as VTB-24 and Russky Standart will continue to dominate the market with their huge investments in the lending sector unless Absolut ramps up capital investment."