Sberbank Plunges Most Since March After Rate Increase

OAO Sberbank shares dropped the most since March in Moscow trading after Russia’s central bank raised interest rates to the highest since 1998 and oil fell below $55 a barrel for the first time in more than five years.

Russia’s largest lender fell as much as 14 percent, and was down 7.7 percent to 55.97 rubles as of 1:07 p.m. in Moscow. VTB Bank tumbled as much as 11 percent in London trading, also the biggest slump in nine months.

The largest rate increase since Russia’s default threatens to undercut an economy already on the brink of recession. Russian banks have seen profits decline amid rising bad loans, a depreciation of the ruble and a deterioration in neighboring Ukraine’s economy. Russia’s gross domestic product may shrink at least 4.5 percent next year if oil averages $60 a barrel, the central bank said yesterday.

“The increase in the cost of capital for banks will add pressure on margins and banks will the first to feel its impact,” Pavel Laberko, head of Russian equities at Union Bancaire Privee in London, said by phone today. “The banks that rely on interbank market and central-bank financing will feel the pressure most.”

Sberbank, led by Putin’s former economy minister, Herman Gref, is among six Russian lenders restricted from borrowing in the U.S. and European Union. Ruble deposits are the main source of funding for Sberbank, which controls about 46 percent of the nation’s deposits.

The boost in Russian borrowing costs, which happened in a surprise announcement just before 1 a.m. in Moscow, was the biggest since rates soared past 100 percent in 1998. The move takes the total increase in borrowing costs to 11.5 percentage points since President Vladimir Putin’s incursion into Ukraine’s Crimea peninsula in March.

Bank of Russia may have “spooked” the market yesterday with a forecast for a “deep” recession next year if oil averages $60 a barrel, Ivan Tchakarov, Citigroup Inc.’s Moscow-based economist, said by e-mail today.

Before it's here, it's on the Bloomberg Terminal.