Russian Banks Loan Industry $31Bln in 9 Months

Who said Russian banks don't lend credit to the industrial sector of the economy?

Data provided by the Yunikon/MC agency shows that loans to industry are currently one of the principal activities of local banks. As of Sept. 1, banks this year had invested no less than 870 billion rubles, or $31 billion, an increase of 19 percent compared with the same period last year.

However, the banks are probably doling out the loans because they have no choice, Yunikon said.

Total investment in the industrial sector was calculated by Yunikon experts based on loans to the non-banking sector (excluding nonresidents), investments in company shares and Russian companies' promissory notes and bonds.

The figures are particularly impressive when compared with the level of foreign investment, which came to $7.9 billion over the first eight months of this year, according to the State Statistics Committee.

Investments made by Russian banks have grown by 137 billion rubles, or about $5 billion.

The nation's two largest banks, however, account for only a little more than one-fourth of those loans. State savings bank Sberbank's credit portfolio came to 211 billion rubles as of Sept. 1, the bank's press service said. As of Dec. 1, Vneshtorgbank's credit portfolio was 28.4 billion rubles.

Other than Sberbank and Vneshtorgbank, only a handful of the major banks are in a position to give credit to leading Russian enterprises. The low capitalization of most banks forbids them from making large loans without violating the maximum credit limits for a single borrower.

But these banks have a found a broad niche for lending credit to small- and medium-sized businesses.

Investments made by Russian banks have grown by 137 billion rubles, or about $5 billion over last year.

"Of all the possible sources for making money, loans are the most profitable," said Vladimir Rashevsky, the deputy chairman of MDM-Bank, which is one of the largest lenders to industries.

"Interest rates on credits are higher than the returns from financial instruments with, for example, fixed income," he said. "We have a minimum of 60 percent of our assets invested in the industrial sector."

Banks credit business in general because they have no other stable source of income, said Dmitry Misyulin, head of the banking projects with Yunikon.

It is for this reason that overall investment into the industrial sector was down from its pre-crisis level of 47 percent in July 1, 1998, to 41 percent in Sept. 1 of this year, he said.

The growth of investments in the economy mirrors an increase in the monetary mass, or the M2 aggregate.

The monetary mass increased by 160 percent, while the volume of bank credits has increased by 159 percent, Misyulin said. Total bank investments in the industrial sector has risen 158 percent from July 1, 1998, to Sept. 1, 2000. Bank assets over this period have increased by 201 percent.

Therefore, it seems that the increase of bank investments in the economy is conditioned primarily by the money being printed, Misyulin said.