Latest news with #ElenaFabrichnaya
Yahoo
04-07-2025
- Business
- Yahoo
Exclusive-Russia's VTB to gain billions of roubles if interest rates come down, CFO says
By Elena Fabrichnaya ST PETERSBURG, Russia (Reuters) -Every 1% cut in central bank interest rates gives Russia's VTB Bank an extra 20 billion roubles ($250 million) in net profit, CFO Dmitry Pyanov told Reuters, which benefits the government as the state-owned lender plans to distribute 50% of its profits via dividends - half of it to the state. Russia's benchmark interest rate remains extremely high at 20%, discouraging borrowers and hurting banks' loan books. While the central bank cut the rate last month from a more than 20-year-high of 21%, pressure is growing on it to bring rates down faster, with government officials and business leaders fretting over the risks of a recession. Among Russian banks VTB has the highest proportion of loans on floating rates, so high official rates raise the risk it faces of more defaults or debt restructuring moves, which in turn can push up its capital requirements, while lower rates stand to benefit the bank's bottom line. "VTB Bank is a main beneficiary of the key rate cut," Pyanov told Reuters on Thursday at a financial forum in St Petersburg. "We suffer most of all during a period of its increase and will realise positive interest rate risk when the rate decreases." "A one percentage point rate cut gives us 20 billion roubles of net profit." President Vladimir Putin in June ordered that VTB's dividend payments be used to finance United Shipbuilding Corporation, which has been under VTB's management since 2023, and has state contracts in the defence sector. The state owns more than 60% of VTB. High interest rates have indeed stalled investment and encouraged companies and consumers to hold money on deposit. Corporate and consumer lending is slowing and the central bank has noted a deterioration in credit quality, although it says the situation is not yet critical. A survey of participants at a financial congress in St Petersburg this week pinpointed the key risk factors as corporate credit concerns and interest rate risks for banks. Pyanov said he did not expect a banking crisis and saw no banks in need of a bailout. DIVIDENDS PLAY KEY ROLE Dividends from state companies are a major source of revenues for Russia's budget, which is operating at a deficit of 1.5% of GDP as Moscow diverts vast sums to the defence sector for its conflict in Ukraine and grapples with reduced energy revenues from lower oil prices this year and a strong rouble. Shareholders of top lender Sberbank approved a $10 billion dividend payout this week. VTB surprised the market in April by announcing its first dividend since the start of the conflict in Ukraine, having slumped to a $7.7 billion sanctions-induced loss in 2022. The total payout of 275.75 billion roubles comes on the back of record profits in 2024 and though a decline is expected this year, profits could once again surpass 500 billion roubles, Pyanov said. Depending on capital adequacy rules that the central bank may adjust, Pyanov said VTB would work hard to keep dividend payments at 50% of net profit for the years to come. Pyanov also noted how the departure of Western capital and the emergence of retail investors as a dominant force in the Russian stock market since the start of the conflict in Ukraine had influenced VTB. Dividends are now key to maintaining shareholder value in Russia, he said. "With such a dominant retail investor, everyone wants dividends," Pyanov said. ($1 = 79.0000 roubles)
Yahoo
26-04-2025
- Business
- Yahoo
Russia keeps key rate on hold, braces for global turbulence
By Elena Fabrichnaya and Gleb Bryanski MOSCOW (Reuters) -The Russian central bank maintained its key interest rate at 21% on Friday, with inflation starting to decline but new risks facing the Russian economy because of global economic turbulence triggered by U.S. trade tariffs. Russia has not suffered directly from high import taxes on many countries announced by U.S. President Donald Trump but is now bracing for a protracted period of lower oil prices - its main export - and declining budget revenues. "A further decrease in the growth rate of the global economy and oil prices in case of escalating trade tensions may have proinflationary effects through the rouble exchange rate dynamics," the central bank said in a statement. Central bank governor Elvira Nabiullina, who had earlier called the trade wars "a tectonic shift", said the changes happening in the global economy were now a key inflationary factor. "The main channel of influence of these tariff wars on the Russian economy is a decrease in prices for the main goods of our exports," Nabiullina said. Lower oil prices mean less foreign currency revenue for Russian oil exporters, which they convert into roubles at home to pay taxes. It will reduce the supply of foreign currency and make the rouble weaker, pushing up domestic prices. INFLATION PASSED PEAK The central bank is keeping the key rate at the highest level since the early 2000s as it struggles to combat inflation. The rouble, which has surged by 37% against the dollar this year, has helped this effort by making imported goods cheaper. "Current inflationary pressures, including underlying ones, continue to decline, although remaining high," the regulator said. It maintained its 2025 inflation forecast at 7.0–8.0%, predicting inflation will return to the target of 4.0% in 2026. Nabiullina said inflation had passed its peak in the fourth quarter of 2024 but the transition to a sustainable decline in annual inflation is expected to occur in May, with a spike in July linked to a planned rise in utilities tariffs. She also said that the rouble strengthening is now seen as more sustainable than before, but its exchange rate to the U.S. dollar was still under the influence of news about Russia-U.S. talks on a peaceful settlement to the conflict in Ukraine. The central bank also left some room for further rate hikes, saying it expected an average key rate in the range of 19.5–21.5% in 2025, compared with the previous estimate of 19-22%. Nabiullina welcomed the Finance Ministry's idea to save more oil revenues in a reserve fund and create a safety cushion during a period of global turbulence, saying such a policy would also help bring inflation rates down. PREDICTABLE CONDITIONS The central bank drew strong criticism from business leaders over its interest rate policy in recent months but Nabiullina, who has the backing of Russian President Vladimir Putin, is expected to keep her job until the end of her term in 2027. The decision to keep the rate on hold was in line with the results of a Reuters poll of 25 analysts. "This decision means that the central bank is creating predictable conditions within the economy in order to reduce the uncertainty currently associated with trade wars and instability in oil prices," said Alfa Bank's Natalya Orlova. The central bank noted that economic activity slowed in the first quarter of 2025, compared with the fourth quarter of 2024. It said the share of enterprises experiencing labour shortages was also declining. The central bank maintained the 2025 growth forecast at 1-2%, below the government's forecast of 2.5%. It said that it would hold its next rate-setting meeting on June 6. Sign in to access your portfolio
Yahoo
21-04-2025
- Business
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Russian central bank expected to keep key rate on hold at 21%
By Elena Fabrichnaya MOSCOW (Reuters) - The Russian central bank will keep its benchmark rate on hold at 21% at a board meeting on April 25, all 25 analysts who took part in a Reuters poll predicted on Monday, as global economic turbulence adds to concerns about the state of the Russian economy. The government maintained its growth estimate for 2025 at 2.5%, a new set of forecasts showed on Monday. The government said it does not see a big risk of a global recession, but cut its estimate for the price of oil, Russia's main export, by 17%. The central bank hiked its key rate to the highest level since early 2000s last October as it struggles to fight inflation. The rouble, which has surged by 40% to the dollar this year, has helped the regulator, making imported goods cheaper. However, lower oil prices as a result of a falling global demand and the risks of a global recession after U.S. President Donald Trump imposed trade tariffs could make the rouble reverse its gains by the middle of the year. "The danger of an impending recession could force the regulator to sharply ease monetary policy, but for now, judging by its rhetoric, the state of the economy does not cause it any concerns," said analysts from Aigenis investment firm. At the meeting the central bank will also review its forecasts, which for now see the economy growing only by 1% to 2% in 2025, while analysts will look out for any comments on trade wars and the global recession risks. Some analysts suggested that the central bank will lower its forecasts for oil prices to bring them more into line with the government's. The central bank's governor Elvira Nabiullina called the trade wars "a tectonic shift" and a "significant risk" saying that it was too early to judge how they will impact the global economy. "Pro-inflationary factors remain on the agenda, and the risks of escalating imported inflation are holding the central bank back from hastily lowering the interest rate," Solid brokerage analysts said. (Writing by Gleb Bryanski; Editing by Toby Chopra) Sign in to access your portfolio
Yahoo
17-04-2025
- Business
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Russian barriers to re-entry stymie prospects of Western companies' return
By Elena Fabrichnaya, Alexander Marrow and Gleb Stolyarov MOSCOW (Reuters) - Three months after U.S. President Donald Trump returned to the White House promising a swift end to the conflict in Ukraine and sparking an early flurry of excitement that Western companies could come flooding back to Russia, realism has set in. Moscow is putting up barriers to re-entry for the thousands of companies that halted operations or sold assets in the country after Russia launched its military offensive, according to government officials and four Russian lawyers. Western companies looking to regain market share face tough negotiations, mountains of paperwork and reputational risks, according to conversations with 12 people in Russia's retail, auto and financial markets. Companies including McDonald's, Germany's Henkel and Hyundai Motor secured buyback agreements when exiting, but returning will not be simple as the government moves to keep a grip on strategic sectors and promote domestic production and businesses. "The Russian authorities will not cancel options that outgoing foreigners concluded with Russian companies, but they will put forward additional demands for their implementation," Alexei Yakovlev, head of the finance ministry's financial policy department, said on the sidelines of a Moscow financial forum in early April. Unilaterally abolishing buyback agreements could spawn waves of litigation, lawyer Ekaterina Drozdova of FTL Advisers told Reuters, suggesting that Russia may introduce an 'entrance fee' to raise budgetary funds. A handful of firms are making discreet enquiries, said four people working with foreign companies in Russia, but there are no serious plans while widespread Western sanctions remain in place. Local companies that have filled niches vacated by departed competitors are also lobbying the government to put up obstacles to any return, said another lawyer who asked not to be named. President Vladimir Putin warned in March that companies that "slammed the door defiantly" when leaving would not be allowed to buy back businesses for small amounts of money or displace local operators. The finance ministry has said foreign businesses would be required to invest in local production, research and development, and share technology. People are definitely talking, said a private equity source who works on Russia, but there are no term sheets, let alone deals. Companies that left in 2022 are not coming back any time soon, the person added. The finance ministry and central bank say no foreign companies have applied to return so far. PRICE COMPETITION Russia's top carmaker Avtovaz said Renault faces a bill of at least 112.5 billion roubles ($1.37 billion) to cover investments made since the French carmaker sold its majority stake for just one rouble in 2022. Like many others, Renault has said it has no plans to return in the short term. Even if it did, the hefty cost would be just one consideration. Chinese firms now dominate the sector with a market share of more than 50%, up from below 10% before 2022, all but closing the door to Western rivals, four car market sources told Reuters. Without local production and access to government subsidies, the likes of Mercedes-Benz, Nissan and Volkswagen would be unable to compete on price, they added. "The market has changed," said Alexei Podshchekoldin, president of the Association of Russian Automobile Dealers. "I don't know if the Europeans will succeed," he added, saying they would need to offer cars of the same quality without a higher price tag. Western automakers are very pessimistic, said one car market source, with the paperwork alone making a return before 2027 unlikely. REPUTATIONAL RISK For well-known consumer brands, there is also the reputational risk of resuming operations in Putin's Russia, said four people working in the luxury retail market. Unlike in the auto sector, Russia has not managed to replace luxury brands and many stores in central Moscow are unoccupied as few local players can afford the high rents, said three of the people, all of whom have worked with European luxury giant LVMH in the past. While some fashion brands remain, major players from Zara-owner Inditex and H&M to LVMH and Chanel have either sold assets or halted operations. If brands return, two of the sources said, they will likely seek a smaller footprint, with less retail space and more direct supplies. Moscow will want to limit foreign ownership through mandatory joint ventures, a model already employed with Chinese firms, two Russian lawyers said. Localising IT systems is particularly important, a third added, as companies running foreign servers can completely shut down their businesses with the "push of a button". Local businesses have meanwhile found local IT solutions, said Anton Nemkin, a member of the State Duma's information policy committee. Even in cases where highly specialised software is needed, companies will face logistical, financial and regulatory challenges, Nemkin said, particularly as new laws around information storage have been introduced. "Are they ready to play by the new rules?" ($1 = 82.2000 roubles) Sign in to access your portfolio
Yahoo
07-02-2025
- Business
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Russia to widen asset seizing power with new legislation, sources say
By Elena Fabrichnaya and Alexander Marrow MOSCOW (Reuters) - Russia is set to widen its power to retaliate for Western asset seizures with new legislation that could allow it to confiscate the frozen funds of foreign companies and investors, two sources familiar with the draft law told Reuters. Around $300 billion of Russian financial assets, such as major currencies and government bonds, were frozen overseas shortly after Moscow despatched troops to Ukraine in February 2022, and Western countries have been debating how best to exploit those assets. A draft bill outlining the procedure for Russia to confiscate foreign property in response to similar actions by other states with Russian assets was approved by the government's legislative activity commission this week, paving the way for it to be debated in the State Duma, Russia's lower house of parliament. The bill, developed by the justice ministry, follows on from a decree signed by President Vladimir Putin in May 2024 concerning the U.S. property and securities Russia could identify as compensation for any losses sustained by the seizure of frozen Russian assets in the United States. The new law would widen that out to all so-called unfriendly states, those that have imposed sanctions against Russia over its actions in Ukraine, the sources said. Decisions would be enforced through lawsuits filed at arbitration court by state bodies such as the central bank, General Prosecutor's office and government agencies. Defendants will be foreign states that have seized Russian assets. A source familiar with discussions around the bill said type-C accounts, access to which is blocked unless Moscow grants a waiver, may end up being targeted. That could spell trouble for the many foreign investors, including both individuals and major U.S. investment funds, with billions of dollars of funds trapped in those accounts. Reuters reported in May last year that Russia may go after private investors' cash as its ability to mete out like-for-like retaliation has been eroded by dwindling foreign investment.
