With recent political and financial turmoil in Russia it has not been a reassuring few months for banks seeking to do business in this politically complicated country. However, for foreign banks that are able to navigate the risks there is a significant opportunity for success—and banks should establish footholds now while the uncertainty is at its height. This is the key recommendation of a new study by Booz & Company, which is the first in a series of reports on the Russian banking market.

The report, Dipping into the Bear’s Honey Pot – Opportunities and Risks in the Russian Banking Market, notes that the Russian banking market is growing much more quickly than that of its neighbors, and is concentrated at the top with a few large players. State-controlled banks comprise 39 percent of the market, private banks 44 percent, and foreign banks 17 percent. However, the majority of the market is very fragmented, with most of the 1,200 banks having a market share of less than one percent. Consolidation is therefore inevitable, and there has already been a 15 percent decrease in the number of banks since 2003. Many of the smaller private banks will not survive, and Booz & Company estimates that there will be fewer than 1,000 banks within a few years.