Wealth management: Russia attracts private banking operations

Financial News

Jason Corcoran in Moscow

30 Oct 2006


Investment banks Credit Suisse and UBS are launching onshore private banking services in Russia, following the success of a Deutsche Bank wealth operation launched two and a half years ago.

Deutsche Bank Private Wealth Management has attracted clients worth nearly $1bn (€790m). Claus Korner, head of the bank’s operation in the country, said: “We have shown there is money to be made in Russia. People who make money here no longer have the target of leaving the market while they can earn higher revenues by staying.”

UBS recently received a banking licence from the Central Bank of Russia. It plans to offer wealth management, asset management, rouble fixed income and foreign exchange services to complement operations in Russia.

Alexis Rodzianko, head of private banking Moscow at Credit Suisse, said economic and political stability, favourable tax laws and the growth of the domestic stock market was helping money to stay in Russia. Rodzianko, who set up Deutsche Bank’s offering in 2003, said the introduction in 2001 of a 13% flat tax helped jump-start the market.

Credit Suisse’s Russian onshore operation aims to attract between $300m and $600m in its first year, although Rodzianko said this would be many times less than sums going offshore.

According to Korner, estimates of the size of the onshore market vary from $40bn to $400bn. Government data indicates private capital outflows from Russia totalled $9.4bn in 2004.

Credit Suisse is providing clients with access to domestic bond and equity markets and basic banking services such as cash and deposit accounts, before expanding to a full-service offering.

Rodzianko said Russians were likely to be relatively aggressive in their onshore investment habits. He said: “They view places such as Zurich, London and New York as safe havens or reserve locations and tend to be more conservative with their money there.

“Here is where they take their risks; this is where they make the money and this is where they know the market.”

Rodzianko believes a shift from offshore to onshore banking makes his life easier.
He said: “Whoever brings their money to Credit Suisse in Moscow has to show us a tax return so, by definition, we are dealing with declared funds. We are careful and watch with whom we do business.”