Sberbank Battles VTB for Home Loans Double Poland: Russia Credit

Competition between OAO Sberbank, Russia’s biggest provider of mortgages, and lenders including VTB Group is helping drive down borrowing rates that are more than twice that of nations including Poland.

Average mortgage rates dropped 10 basis points this year to 12.7 percent, Andrei Tumanov, an analyst at the Agency for Housing Mortgage Lending, said from Moscow in a phone interview last week. That compares with an average 3.45 percent for euro-region mortgages in May and 5.5 percent for new home loans in Poland, according to central bank data.

Mortgage rates are higher in Russia as Bank Rossii has kept the refinancing rate at 8.25 percent for the past 10 months to curb inflation above its target range. The slowest economic expansion since 2009 crimped mortgage-lending growth to 21 percent in the first half from at least 40 percent for the past three years, according to the agency.

“We expect average interest rates to decline by as much as 1 percentage point as demand for apartments slows and banks compete for new customers,” Tumanov said.

State-run Sberbank, the nation’s largest lender, has 43 percent of the market, more than double the holding of nearest rival VTB, while Societe Generale SA’s OAO DeltaCredit and OAO Rosbank have 2 percent each, acccording to the agency. The market exceeded 1 trillion rubles ($31 billion) in 2012, Tumanov said July 17.

Loan Varieties

Sberbank offers discounted rates for servicemen and young families, its website shows. It’s also teaming up with developers, the press service said in an e-mailed response to questions on July 19. The Moscow-based lender said it has 48 percent of the market by its own estimates.

ZAO VTB24, the retail arm of Russia’s second-biggest bank, introduced an “anti-bureaucracy” mortgage for customers to complete applications within 24 hours, according to its website. It also promotes loans with terms of as long as 50 years. The bank increased market share by 0.5 percentage point to 16.1 percent in the first half, Senior Vice President Andrei Osipov said by e-mail on July 19.

Rate Increase

While competition for more customers is increasing, this may not lead to lower borrowing costs, according to Vladimir Savov, an analyst at Otkritie Capital in Moscow.

“Rates may increase as the quality of borrowers declines and banks take on more risk,” he said by phone on July 24.

Sberbank shares the government’s Baa1 ranking, the third-lowest investment-grade category, at Moody’s Investors Service. The yield on its dollar-denominated bonds due October 2022 fell eight basis points, or 0.08 percentage point, to 5.80 percent by 1:27 p.m. in Moscow, taking the decline this month to 20 basis points. The rate on debt maturing the same month from VTB, ranked one step lower at Moody’s, fell five basis points to 6.67 percent.

The yield Russia’s bond due April 2022 has fallen 26 basis points this month to 3.95 percent.

OAO Gazprombank, partly owned by state-run natural gas exporter OAO Gazprom, increased mortgages by 35 percent in the first half, Vice President Anna Goryacheva said in an e-mailed response to questions. Goryacheva said rates will probably drop “a little” by year-end.

DeltaCredit, which issued 14 billion rubles of mortgages in the first half, is offering lower rates for some borrowers, Yulia Yermilova, a spokeswoman, said by e-mail on July 19. Rosbank is responding to “high competition” by easing terms and reducing lending fees, interim Chief Executive Officer Igor Antonov said by e-mail on July 24.

“Sberbank has historically dominated the market, but now it’s retreating as other major banks start to compete for customers,” Mikhail Shlemov, chief banking analyst for VTB Capital, the investment banking arm of VTB, said by phone from Moscow on July 22.

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