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Sberbank says Russia “bad loans” rising fast

Posted on: April 1, 2009


Reuters – Wednesday, April 1

  • Sberbank sees provisions rising to 7.5-9.0 pct
  • UniCredit unit sees profits no less than in 2008
  • Bank Vozrozhdenie sees 2009 net income up 15 pct

By Dmitry Sergeyev and Oksana Kobzeva

MOSCOW, March 31 – Russia’s top lender, Sberbank <SBER03.MM>, said bad loans are expected to continue to climb sharply, dampening positive market sentiment after two of Russia’s Top-30 banks said they would post good profits in 2009.

“We see the share of bad loans rising fast and expect this trend to continue,” Sberbank’s head, German Gref, told reporters on Tuesday.

He said bad loan provisions would increase to 7.5 percent to 9.0 percent of its loan portfolio by the end of 2009, revising its previous one-month-old estimate of 5.0 percent to 7.5 percent.

The forecast was revised after Sberbank saw bad loans rising to between 2.7 percent and 2.8 percent of its portfolio and provisions to 5.5 percent, as of April 1.

Government officials have said Russian banks could see their profits fully erased this year should bad loans triple to 10 percent of the total portfolio, triggering provisions of around $45 billion.

Prominent Russian banker Pyotr Aven, president of the country’s top private bank, Alfa Bank, said last week hundreds of small Russian banks could go bankrupt as the level of bad loans is likely to hit 15 percent to 20 percent by the end of this year.

Gref said he was sticking to a previous forecast that bad loans would rise to 10 percent of the overall banking sector loan portfolio by the end of 2009.

He said the bank would cut its head office staff by 10 percent this year but still intended to pay a dividend of between 5 billion and 10 billion roubles for 2008, when it had a net profit of 109 billion roubles, up from 106.5 billion in 2007.

Sberbank, which has benefited from state recapitalisation help and an inflow of depositors fleeing from smaller banks, has said it expects 2009 earnings to be much lower than last year. Gref said it could even see a loss, in a worst-case scenario.

RARE EXEPTIONS

Before Gref spoke, Sberbank shares closed 4.2 percent up, outperforming the broader MICEX index <.MCX>.

The gain was beaten, however, by a 14 percent climb for shares in mid-sized Bank Vozrozhdenie <VZRZ.MM> after it said 2009 net income would rise 15 percent.

Italy-based UniCredit’s <CRDI.MI> Russian unit, also said on Tuesday it expected 2009 profits to be no less than in 2008.

Bank Vozrozhdenie and UniCredit’s Russian unit — both of which are ranked in the Top-30 Russian lenders — said they hoped to avoid a sharp spike in non-performing loans.

Analysts said the developments at both lenders would be a rare exception in the sector.

“Those two banks have always been known for their conservative policy and a sound approach to business. They just cannot serve as an indicator for the banking sector as a whole,” said Leonid Slipchenko, a banking analyst at Uralsib Bank.

UniCredit’s Russian unit said it plans to expand its loan portfolio by around 25 percent this year without increasing its delinquent loans significantly above the 2.3 percent level seen on Jan. 1.

Profits stood at 10.9 billion roubles last year and should not be smaller this year, Mikhail Alexeyev, chief executive of UniCredit Russia, told reporters.

Bank Vozrozhdenie expects 2009 net profit to rise 15 percent to 3.6 billion roubles, Tatyana Gavrilkina, bank’s deputy chief executive said. Vozrozhdenie expects non-performing loans to reach 5-6 percent in 2009 from 3.4 percent at the end of 2008.

(Reporting by Dmitry Sergeyev and Oksana Kobzeva, writing by Dmitry Sergeyev; Editing by Hans Peters and Simon Jessop)

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