HSBC Bets on Bonds, Loans in Russia After Selling Consumer Unit

HSBC Holdings Plc is focusing on organizing Russian debt sales and providing loan financing and export credit a year after selling its consumer business in Russia, according to its local chief executive officer.

“We came to the market too late and in too small a size” as a consumer bank, Mark Stadler, 52, said in an interview yesterday in his Moscow office. “If we had made the investment a decade or 15 years ago, it might have been a very different story. The focus has shifted, and it’s now being a network bank, which is to link Russian corporates looking out and multinationals looking in.”

Europe’s largest bank was hired this month by Russian lenders OAO Sberbank, OAO Gazprombank and Home Credit & Finance Bank to arrange $3.5 billion in debt sales. London-based HSBC has a 50 percent share of the export credit market in Russia this year by number of deals, according to the bank.

HSBC, along with Barclays Plc and Banco Santander SA, are among international lenders that abandoned consumer banking in Russia over the past two years as state-controlled Sberbank and VTB Group increased market share. Nomos Bank, Russia’s second-biggest privately owned bank, is being acquired by Otkritie Financial Corp, part-owned by VTB.

HSBC in March 2008 announced a $200 million capital injection into its Russian unit that “demonstrated” its long-term commitment to the nation, ex-Russia CEO Stuart Lawson said then. Six months later, Lehman Brothers Holdings Inc. collapsed, triggering a global market rout as credit markets froze.

Third CEO

The bank had four branches in Moscow and one in St. Petersburg and had been building local wealth management and ruble-bond-trading operations. Its loan book was sold to Citigroup Inc. in June 2011 and the branches to Sberbank that September, according to HSBC.

Stadler was named CEO of HSBC’s Russia unit in May, the bank’s third local head since 2010. He succeeded Huseyin Ozkaya, who replaced Lawson. The British-born Stadler, who doesn’t speak Russian, had moved to London this year from Dubai to run private banking in the U.K. and was previously global market head of HSBC Private Bank in the Middle East and North Africa.

“State banks here are formidable competitors, and we are used to that experience in other parts of the world with China and India being obvious examples,” Stadler said.

HSBC, which generates most of its profit in Asia, is planning to sell 10 billion rubles ($333 million) in its first Russian debt issue to diversify funding and to meet demand by international clients operating in Russia, Stadler said.

IPO Pulled

The bank, which has more than 270 employees in Moscow and St. Petersburg, is the 10th largest organizer of foreign debt in Russia this year, according to data compiled by Bloomberg. HSBC was also hired by OAO Promsvyazbank to help it sell shares in an initial public offering. The IPO was postponed on Oct. 15, and HSBC is looking at alternatives for Promsvyazbank to raise capital, such as selling subordinated debt, Stadler said.

“We have seen at first hand the clear preference by investors to take credit rather than equity risk,” he said. “The Promsyvazbank IPO, which we were a lead on, was pulled because investor pricing requirements were not in line with the bank’s view on valuation.”

HSBC is “looking again” at Russia’s privatization program after not applying to the Kremlin to be an adviser, Stadler said. Twenty-three domestic and foreign banks were chosen to advise the government on its 1 trillion rubles of asset sales.

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