Aug. 24 (Bloomberg) -- OAO Sberbank, Russia’s largest lender, said profit in the first seven months of the year declined 92 percent after building reserves against bad loans as the economy shrank.

Net income to Russian accounting standards tumbled to 6.8 billion rubles ($217 million) from 81.8 billion rubles in the same period last year, Moscow-based Sberbank said on its Web site today. Net interest income rose 46 percent to 216 billion rubles, the bank said.

Prime Minister Vladimir Putin said last month Sberbank, which holds 50 percent of Russia’s retail deposits, bears a “huge responsibility” to lend and help stimulate the economy after it contracted at a record pace in the first half of the year.

Overdue debt reached 3.2 percent of loans in July, the bank said. Sberbank spent 218 billion rubles building reserves, compared with 27.6 billion rubles in the year earlier period.

Russia’s central bank has cut the refinancing rate and repurchase rate charged on its loans five times since April 24, in an attempt to stimulate lending and rein in inflation.

Corporate lending rose 7.2 percent to 4.27 trillion rubles as of July 1, while the volume of retail loans slid 6.7 percent from the start of the year to 1.17 trillion rubles.

Consumer deposits advanced 8.2 percent to 3.38 trillion rubles, and corporate accounts fell 10 percent to 1.6 trillion rubles.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net

Last Updated: August 24, 2009 11:27 EDT