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As Banks Redraw Moscow's Skyline...Pride May Go Before A Fall (Int'l Edition)

International -- Spotlight on Russia


SBS-Agro Bank, Russia's sixth-largest commercial bank, began operations eight years ago from a one-room basement apartment during the heady days of perestroika. Now it occupies prime real estate in central Moscow, including three lavishly restored pre-revolutionary buildings, their walls adorned with paintings of Russian masters such as Wassily Kandinsky. "This was one of our first projects," says press secretary Nina Petrova, reclining in a black leather sofa in the bank's swank credit-card headquarters, whose porthole windows and sculpture-decorated atrium make it look like a transatlan-tic liner. "But it's certainly not our last."

Russian banks, which made fortunes speculating on the ruble in the early 1990s, were among the early winners in the painful transition to capitalism. Like Russia's sable-clad, BMW-driving nouveaux riches, they're keen to flaunt their wealth. And what better way to dazzle clients than with opulent offices?

Even state-owned Sberbank, the largest bank in the country, forked over the cash for a glittering, 26-story headquarters in south Moscow. Tokobank spent tens of millions on twin-towered modernist high-rises on the Moscow River, built to exacting Western standards--including ergonomic chairs and card-key-operated doors. The Russian touch: wooden saunas above the boardroom.

Others, like MOST and Alfa Bank, which do not have swank headquarters yet, are rushing to build. To be sure, banks are not the only ones strutting their assets in the sky: Gazprom, the gas monopoly, two years ago opened a $60 million headquarters in south Moscow in cobalt-tinted glass-and-steel. But financial institutions are leading the pack, because, says James Fenkner from U.S. consultants CenterInvest Securities, "in the banking business today, image is everything."

While modernist chic is the rage among most banks, some have opted for a more ancien style, cashing in on the current nostalgia for the pre-1917 era. Rossiisskii Kredit has renovated the former mansion of the Morozovs, a wealthy merchant family, complete with the sphinx-dominated Egyptian reception hall; even the metal detectors are painted over in hieroglyphics. "We're creating a continuity with the past," says press spokesman Oleg Misjuk. "Our slogan, after all, is: `From generation to generation."'

BLUE CHIPS. While banks might prefer a classical facade for their headquarters, they often choose glass and steel for branch offices. Old buildings can be cumbersome--Rossisskii Kredit traders work out of a converted stable with exceedingly low ceilings--but there's another reason: Bankers have learned to make serious profits from construction. Moscow office leasing rates are among the highest in the world. Tokobank only occupies four floors in its 14-floor flagship, leasing the rest to blue-chip clients like AT&T, British tobacco giant Rothmans, and Germany's Ruhr Gas. "Within four to five years, we'll have paid off the cost," says building manager Vycheslav Haklov.

Not all banks have shown real estate savvy, however. TverUniversalbank, Russia's largest regional bank, based in the southern town of Tver, was forced to declare bankruptcy last summer, its resources strained by a bid to build a $35 million headquarters. The building now lies empty and unfinished, a stark reminder of the dangers of excess. AvtoVAZbank, the bank of car manufacturer AvtoVAZ, was also contemplating a real estate splurge when it watched its credit dry up, forcing a rescue by the Central Bank.

With profits falling as the stabilizing economy dries up easy money from speculation, many banks are tightening their belts and focusing more on balancing the books than on building. Oneximbank has put off moving from its Soviet-era headquarters. Others have reneged on ambitious projects for fear of falling prey to the TverUniversal syndrome. "There's less money going around," says Rossisskii Kredit's Misjuk. "Lavish renovations might be a thing of the past."

And a bank shakeout is under way, with as many as 25% of the country's 2,000 banks expected to close or be forced into mergers in the next two years. The ones that get too grandiose might find their Persian carpets pulled out from under them.EDITED BY HARRY MAURER By Vijai Maheshwari in MoscowReturn to top

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