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22.09.2008 - MDM Comment: More Reasons Not To Fear For Russian Banks

On Friday and this morning more news emerged concerning the Russian banking sector, which is detailed below, along with our comments. We believe that each item of news goes some way to reinforcing our strong belief that none of Russia’s top-50 banks will go bankrupt, despite the challenging environment caused by the global liquidity crisis.

1. The Ministry of Finance (MinFin) has allowed more banks to access its ‘deposit auctions’. According to Reuters, MinFin altered its decision to allocate the extra RUB400 bn earmarked for 3-month deposits only to the three largest banks, Sberbank, VTB, and Gazprombank. On Sunday MinFin said that instead this money will be offered to all 28 banks that had earlier received access to its regular auctions. One should bear in mind that access to cash in not unlimited: The amount allocated to each bank is set as a percentage of its capital (it varies depending on rating from 10% to 40%). We view MinFin’s decision as the right one: It increases the chances that the liquidity will reach the banks that truly need it. At the bottom of this commentary is a list of the banks eligible to access the MinFin money (key criteria is a rating of Ba3/BB- or above and a capital of at least RUB5bn).

2. Russia’s lawmakers are planning to approve an increase in the limit up to which private bank deposits are guaranteed by the state from RUB 400,000 up to RUB 700,000 (Source: Vedomosti). We see this as a common sense move that should ensure more stability and reduce the risk of a run on any banks in the current environment.

3. KIT Finance Bank (Caa2) has paid on all of its overdue liabilities after receiving a RUB22.5 bn line from Gazprombank. KIT is expected to announce its sale to Leader Asset Management, historically a large client of KIT’s. Leader is part of the Gazprom group.

4. VTB is likely to acquire Svyaz-Bank (B2), which reportedly is experiencing difficulties due to a significant trading portfolio and high exposure to inter-bank market. This is a prime example of what we have long labeled ‘the Guta-scenario’, i.e. the acquisition of a troubled bank of significant size by a state-controlled institution as a measure of last resort. While we are confident that the absolute majority of large Russian banks are sustainable on a stand-alone basis, we believe that if any other significant bank faces difficulties, it will avoid bankruptcy via an equity deal or shareholder support. The same should be true for the largest local brokers, as today’s news on RenCap and ONEXIM suggests.

5. Finally, Sberbank is raising a USD1.2 bn syndicated loan arranged by foreign banks. According to sources familiar with the deal, the book is already oversubscribed (Source: Reuters). In our view, this is good news in the sense that it confirms that Russia’s national champions still maintain their access (albeit limited) to debt capital markets.

 

The list of Russian banks, which have access to MinFin’s auctions (source: our estimates based on various reports):

Sberbank

VTB

VTB 24

Gazprombank

Alfa Bank

Bank of Moscow

UniCredit Bank

Raiffeizenbank

Uralsib Bank

MDM Bank

Russian Agriculture Bank

Rosbank

Promsvyazbank

Nomos Bank

Russian Standard Bank

AK Bars

Ursa Bank

Petrokommertz

Uralsib Bank

Zenit

Absolut

Saint-Petersburg Bank

TransCreditBank

Khanty-Mansiysk Bank

Orgres Bank

Credit Europe Bank

OTP Bank

Evrofinance Mosnarbank


22.09.2008 13:37
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