Bloomberg News

Sberbank to Cut Loan Rates as Russian Inflation Slows

April 16, 2010

OAO Sberbank, Russia’s biggest lender, will cut interest rates and stop charging commission on retail loans next week as inflation slows, Chief Executive Officer German Gref said.

Sberbank will lower rates on all retail loans starting April 19th, Gref said today during a meeting with Prime Minister Vladimir Putin, according to a government transcript. Signs of some credit portfolio growth are emerging for the first time this year, the “beginning of a positive trend,” he said.

“We are significantly modernizing our credit policy because the inflation rate has been falling recently,” Gref said. “We see that until the end of this year, the trend of falling inflation and a further lowering of interest rates will continue.”

Consumer price-growth eased to the slowest rate in 12 years in March, reaching an annual 6.5 percent. The credit portfolio of Russian banks excluding Sberbank expanded about 1.5 percent in March, the first indicator of lending growth this year, according to Bank Rossii Chairman Sergei Ignatiev.

This may be “a coincidence or a change of trend,” he said on April 9. Lending may grow 15 percent this year, according to Ignatiev. The central bank cut its main interest rates for the 12th time in less than a year on March 26 to resuscitate lending and contain the ruble’s gains.

‘Difficult’ Results

Sberbank, which extended about 78 percent of all Russian mortgage loans last year, posted “difficult post-crisis results,” Gref said. The economy of the world’s biggest energy exporter contracted a record 7.9 percent last year after commodities prices plunged and global credit markets shut down.

Lower rates will shrink the lender’s margins, while boosting the demand for loans, Gref told reporters in Moscow today. Still, he reiterated Sberbank expects net profit to reach 100 billion rubles ($3.44 billion) this year.

The bank will need to increase its retail loans portfolio by 5 percent to 5.5 percent to compensate for cutting rates and dropping commission charges, which Alexander Morozov, a member of Sberbank’s board, called a “revolutionary” decision for the Russian market. He also said Sberbank will lower its interest rates on corporate loans without providing details.

“Companies had a significantly higher shock than individuals” during the crisis, Gref said. In contrast to developed economies in Europe and America, Russian incomes increased “somewhat” last year because government pensions rose, he said.

The retail lending portfolio is set to recover faster than corporate lending, which is also going to expand as companies become more active in the second half, according to Gref. “The demand from people and companies needs time to recover,” he told reporters.

Sberbank doesn’t expect the share of overdue loans in its portfolio to grow this year, Gref said. Still, the lender doesn’t plan to cut its reserves, which cover the overdue loans more than twice.

“We are in no hurry to cut reserves,” Gref said. “We want to feel secure.”

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

To contact the editor responsible for this story: Chris Kirkham at ckirkham@bloomberg.net


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