Russian Central Bank Heeds Calls for Longer-Term Lending

Russia’s central bank will resume lending to banks for as long as a year, paving the way for the three biggest lenders to seek at least 800 billion rubles ($27.2 billion), according to Raiffesenbank analysts.

Bank Rossii will offer loans of up to one year backed by non-market assets and gold, effective April 2, the regulator said in a statement on its website today. The central bank also said on March 28 that it would provide repurchase and lombard auctions for as long as a year starting April 9.

“Above all, the recipients of this long-term funding from the central bank will be Sberbank and VTB,” analysts at Raiffeisenbank in Moscow wrote in an e-mailed research note today, referring to the repo and lombard auctions. “By our estimates, these are the banks with the biggest need for longer-term funds because of the imbalance between lending growth and deposit growth on their balance sheets.”

The decision follows Sberbank Chief Executive Officer German Gref’s call last month for the central bank to offer loans of at least one year. VTB President Andrey Kostin said in an interview with the Financial Times that Russia should follow the European Central Bank’s example and provide loans of up to three years.

“The central bank feel they must be in the market to set the rate because they don’t want to be undermined by other government agencies,” Clemens Grafe, chief economist at Goldman Sachs Group Inc. in Moscow, said by phone.

Vnesheconombank, Russia’s state-run development lender, said on March 26 it will offer banks 40 billion rubles ($1.4 billion) in a 347-day auction.

Sberbank, VTB

OAO Sberbank and VTB Group, Russia’s two largest lenders, advanced in Moscow trading, snapping three days of declines. Sberbank rose 1.1 percent to 94.64 rubles, while VTB climbed 2.1 percent to 6.686 kopeks. Sberbank, VTB and OAO Gazprombank, the country’s three biggest lenders by assets, have enough collateral on hand to collect at least 800 billion rubles in one-year loans, Raiffeisenbank said.

Russia’s economy expanded 4.3 percent last year as retail lending and growth in real wages helped spur a boom in consumption. Unlike European lenders, Russian banks don’t need long-term lending from the central bank, First Deputy Chairman Alexey Ulyukayev said at a business forum in Switzerland last month.

Sberbank and VTB together accounted for 81 percent of the central bank’s lending backed by non-market assets such as promissory notes, Raiffeisenbank said. The loans are for up to half a year.

Sberbank, in which Bank Rossii is planning to sell a 7.6 percent stake to investors, received 237 billion rubles and VTB has 162 billion rubles of the 496 billion rubles in outstanding credits collateralized by non-market assets, the analysts wrote.

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