Sunday, September 14, 2014

14/9/2014: Update: Sanctions Round 4: Russian Banks, Stocks & RUB

Updating my chart on Russian stock market performance:

A very interesting set of statements from Sberbank Chairman, German Gref on the impact of sanctions on Russia's largest bank. Two source articles for this are: and

Some quotes from the above:

  1. External funding markets are already de facto closed [for Sberbank] - including markets for debt under 90 days (recall, debt over 90 days is directly restricted under the sanctions). De facto, per Gref, sanctions are much tighter than de jure. Hard currency liquidity position of the banks is severely disrupted. 
  2. Impact is significant: Sberbank has 28 outstanding euro debt issues in the markets: 22 of these are denominated in USD, 3 in CHF, 1 in Euro, 1 in Turkish lira and 1 in rubles. Prior to the EU sanctions (round 3), Sberbank placed USD1 billion in 10 year 5.5% coupon euro-debt in February 2014.
  3. Russian banks are seeking new avenues for raising debt and equity. Per Gref, Sberbank is looking to re-list some of the existing equity, currently trading in US and European markets in other markets. Singapore is one potential platform, with Sberbank considering following in the footsteps of Gasprom which re-listed some shares in Singapore in June 2014. Sberbank is looking at Singapore as a new platform for both equity and debt. Currently, Sberbank shares are traded in London (LSE: September 10 daily volume traded is USD64.1 million), Frankfurt (Xetra: daily volume is insignificant at USD77,453 million), over the counter in the NY (volume is also small at USD0.95 million) and in Moscow (volume RUB6.8 billion or USD181.3 million). Moving into Singapore can provide significant access to new markets for Sberbank and open, simultaneously, access to new debt issuance.
  4. Gref expects that the CBR will raise deposit rates on foreign currency deposits to increase funding pool.
  5. There are no serious issues with ruble-denominated liquidity, although share of ruble funding coming via the Central Bank is relatively high and rising. State funding is now the main source for growth in credit supply since July as CBR funding rose by RUB223 billion to RUB5.6 trillion, Federal and regional budgets funding is up RUB87 billion to RUB624 billion, and funding via Finance Ministry is up RUB36 billion to RUB656 billion. Share of state funding in the banking system is now at a record of RUB7.1 trillion (13.7% of total banking sector liabilities).

In a related statement, another sanctioned bank, Rosselkhozbank also noted that new sanctions have zero material impact on its access to foreign liquidity, as debt markets de facto froze on foot of the third round of sanctions.

As a reminder, Sberbank, VTB, Gazprombank, VEB and Rosselkhozbank were hit by the fourth round of sanctions announced this Friday. The new round extends July 2014 3rd round of sanctions and prohibits EU investors from trading in new equity and debt instruments issued by these banks with maturity in excess of 30 days (previous round banned trading in instruments with maturity over 90 days).

Note: As covered on this blog, the CBR has de facto allowed free float of the RUB in advance of its pre-commitment to do so starting from January 2015. The CBR stopped interventions in the FX markets back in June 2014 and non-intervention continued through August and into the first two weeks of September. Prior to June, the CBR actively intervened in the FX market to support RUB. Over the last 6 years, the longest period of non-intervention in the FX markets was just 3 days.

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