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Interview with Raiffeisenbank Austria’s Board Chairman Michel Perhirin, source: Prime-Tass

INTERVIEW: Raiffeisenbank posts 35% net profit increase in 2004

MOSCOW, May 19 (Prime-Tass) -- Russia''s Raiffeisenbank Austria posted anear 34% increase in net profit in 2004 to U.S. $65.8 million, while itspretax profit rose 32.4% to $82.1 million, the bank''s Chairman of theBoard Michel Perhirin said in an interview with Prime-Tass this week.

Individual deposits rose 63.7% to $ 767.76 million and corporatedeposits rose 92% to $926 million, while its corporate loan portfolioincreased 75.7% to $1.77 billion.

The bank''s Moscow retail loan portfolio increased to $374.25 million in2004 from $142.3 million in 2003, while its retail loan portfolio in St.Petersburg was up to $103.86 million from $22.4 million.

"Our bank showed excellent results and has so far developed at a fasterpace than the market," Perhirin said

The bank’s total assets rose by more than 45% to almost $3 billion in 2004, he said.

The bank plans to have 10 regional branches in Russia by June 2006,Perhirin said, adding that the bank currently has two branches inSt.Petersburg and a branch in Yekaterinburg.

"We have already started working on setting up branches in five cities,including Samara, Nizhny Novgorod, Novosibirsk and Rostov-on-Don, and weare planning to open branches in Krasnoyarsk, Chelyabinsk, Perm,Krasnodar, and Tyumen," he said.

In Moscow, the bank now has 11 fully operational branches, threeexchange offices and two operational cash offices, and it plans to openseveral more branches in Moscow by the end of the year.

Commenting on media reports that the bank had signed a deal with theExperian/Interfax credit bureau, Perhirin said,"Raiffeisenbank has notyet signed a cooperation agreement with any credit bureau."

"In order to make a thoughtful decision, we have signed confidentialitynotes and letters of intention with leading groups to better understandpotential structures and products. We expect the proper serviceagreement to be signed within a few weeks," he said.

"We have seriously and thoroughly considered all offers on the market.Above all, we tried to assess the capability of these groups to launch aquality product by the time the law on credit bureaus comes into force(later this year). We look at all the options and will choose the mostsuitable one," he said, adding that the bank would"work with a creditbureau, but will not get involved in the capital structure (of thecredit bureaus) in the nearest future."

"Taking into consideration the bank’s plans for the regions, we do not exclude the possibility of cooperation with local, regional bureaus as well," Perhirin said.

Perhirin said that prospects for the credit bureau business werepositive, although currently only a fraction of the Russian populationtakes out long-term loans.

"We expect to see very strong development in the car loans and mortgagessector. In one to two years, credit cards will lead to another boom inRussia, at least in the most developed cities. We introduced our creditcard product back in autumn 2003 and will start aggressively promotingit once the demand is really there," he said.

Speaking about the impact of Russia''s forthcoming accession to the WorldTrade Organization (WTO) on the Russian banking sector, Perhirin said hethought that the sector should be given a transition period of five toseven years to allow domestic banks to better compete with major foreignretail banks expected to arrive.

"Any foreign bank now can get direct or indirect access to the Russianmarket. To our knowledge, no foreign bank has yet been denied access onthe basis of a subsidiary structure," he said.

Foreign banks are not allowed to open branches in Russia, and have tocreate a Russian subsidiary instead.

"As far as indirect access is concerned, any foreign bank can lend toRussian borrowers through international financial markets. Such lendingcurrently represents close to 40%, or approximately $65 billion, oftotal borrowings by Russian corporations," he said, adding thattransactions of more than $4 billion are known to be under negotiationat the current time.

"As far as we are concerned, as a bank we have chosen to go down thesubsidiary route, and anyone can do the same," he said.

Perhirin said that in order to integrate itself into the global bankingsystem, Russia would eventually have to fully open its market and allowbranches of foreign banks to be set up in Russia, but that Russian bankswould receive the same right in return.

"Everyone acknowledges that if foreign banks were allowed to openbranches in Russia, it could immediately destabilize the domesticbanking system, which is undergoing a process of development andconsolidation," he said.


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