April 25, 2011 / 8:29 AM / 7 years ago

UPDATE 2-HSBC to close retail banking business in Russia

* Advising customers to close accounts by end-June

* Norvik bank may also quit - paper

(Adds CEO Russia quote)

MOSCOW, April 25 (Reuters) - HSBC (HSBA.L), Europe’s largest bank, is to close its retail banking operation in Russia after just two years, following in the footsteps of British peer Barclays (BARC.L).

“Following a strategic review it is clear that the strongest opportunity for HSBC in Russia lies in servicing corporate and institutional clients,” Huseyin Ozkaya, chief executive at HSBC Russia, said on Monday.

“That is why we have taken the decision to exit from our retail business and reduce our Private Banking presence to a representative office.”

HSBC, whose Russian unit is among the country’s top-100 lenders by assets, urged customers to close their accounts by June 30. The move by HSBC, which started retail operations in Russia in mid-2009, followed an announcement by Barclays in February it was to sell its Russian retail unit as it was unable to compete and would focus on investment banking. [ID:nLDE71E1NO]

Russia’s banking sector is dominated by state-owned banks, which control around 60 percent of the system’s overall assets.

Top lenders Sberbank SBER03.MM and VTB (VTBR.MM) have also been expanding in investment banking, meaning competition for business being generated by a 1 trillion rouble ($33 billion) state privatisation drive will be tough.

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Analysis on Russia’s banking system: [ID:nLDE71H0J7]

Breakingviews on Barclays decision: [ID:nLDE71H0L4]

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Privately owned Icelandic investment company Straumborg may also quit Russia’s retail banking sector by selling Norvik, Kommersant reported on Monday, quoting banking sources.

Straumborg, which bought Norvik before the global financial crisis in 2006, has already found a potential Russian buyer for the asset, the paper said.

The Russian units of Italian lender UniCredit (CRDI.MI) and Austrian group Raiffeisen Bank International RBVI.VI are the largest foreign players in Russia, being eighth and ninth by assets respectively.

Along with French bank Societe Generale (SOGN.PA), they have said they will develop their businesses in Russia. [ID:nLDE72M24V] (Reporting by Jason Bush, Katya Golubkova and Toni Vorobyova; Editing by Toni Vorobyova and Dan Lalor) ($1 = 29.91 roubles)

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