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In view of president Vladimir Putin's assault on Yukos it might seem an odd time to take on extra Russian risk. Nevertheless, that is just what RZB's Russian subsidiary, Raffeisen Zentralbank Oesterreich (RZO), has been doing in its lending operations, and the strategy has been paying off.
Most foreign banks have restricted lending to the largest companies in Russia, such as Yukos, Norilsk Nickel, LUKoil and Sibneft. These are listed on exchanges abroad, and have international accounting standards and steady revenue streams. Foreign banks are comfortable lending to them. But as more and more banks have sought to increase Russian exposure in the past few months, yields for such credits have tightened considerably, from Libor plus 4 or 5 basis points, to plus 2.5bp or 3bp. Michel Perhirin, chairman of Raffeisen Zentralbank Oesterreich, says: "We began questioning the profitability of lending at these rates. For us, we consider yields of Libor plus 2.5bp or 3bp not attractive at all for the risk."
RZO is searching beyond the top-tier companies for better yields, taking chances most foreign banks aren't willing to contemplate.