Russia takes steps to prop up struggling companies
Russia has moved to support a number of large companies and banks as it tries to prop up a struggling economy and a banking sector battered by the rouble's jitters.
On Wednesday, the government said it would support Yamal LNG, the Arctic gas project of Novatek, with Rbs150bn. Separately Gazprombank, the country's third-largest lender, said the government had bought Rbs39.95bn in preferred shares, using money from a subordinated deposit the bank had returned to the National Wealth Fund.
"The conversion allows the bank to strengthen its capital structure and provides for sufficient scope to expand its operations," the lender said. The support follows a Rbs100bn capital injection from the NWF into state-owned VTB, the second-largest bank, this week. VTB said it expected to receive a further Rbs150bn in the first quarter of 2015, while Gazprombank has asked for a further Rbs30bn.
Russia's international reserves have fallen to $388.5bn, down from $509.6bn a year ago, the central bank said on Wednesday, while the state statistics agency Rosstat said inflation for the year had hit 11.4 per cent
Moscow is stepping up financial support for companies as the economy is being driven into recession by a toxic mix of sanctions (blocking many Russian borrowers from western capital markets), sliding oil prices and a dramatic devaluation of the rouble - which is also threatening the stability of the banking system.
The rouble has depreciated more than 40 per cent since the beginning of the year. Foreign currency loans coming up for repayment have become more expensive - a bigger problem for banks because they lack the foreign currency revenues of resource exporters. Savers, spooked by the rouble's collapse on December 16, have withdrawn large amounts of deposits, weakening banks' capital base.
On the last trading day ahead of the new year holiday, the rouble resumed its slide, dropping to 60.4 against the dollar, its lowest valuation since December 19.
The government tripled funds committed to the rescue of Trust Bank, a midsized lender that foundered after the rouble's collapse, to Rbs127bn. Under legislation passed this month, Moscow will prop up the banking sector with Rbs1,000bn next year through OFZ federal loan bonds.
Standard & Poor's this week put the long-term ratings of 13 Russian financial institutions - including Gazprombank - on negative credit watch, a week after saying it was considering a downgrade of the sovereign rating to junk status in January.
Moody's said this month it was reviewing for downgrade the ratings of 16 Russian financial institutions because of the "severe and rapid deterioration in the operating environment in Russia".
GDP growth was 0.5 per cent lower in November than the same month last year, the first such contraction since October 2009. Anton Siluanov, finance minister, has forecast that GDP will fall 4 per cent next year, while the central bank forecasts a 4.5 per cent contraction.
The government said on Wednesday it had decided to raise the capitalisation of Russian Railways by buying Rbs50bn in additional preferred shares in the state company to help it finance the modernisation of two rail lines in Siberia. Moscow said it had approved state guarantees for $600m in loans to the Sukhoi aircraft company for its Superjet civilian aircraft.