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The Moscow Times Moscow Guide – Winter 2008

Since the middle of autumn one of the most important topics of discussion, could only be … no, not the financial crisis… New Year! The winter issue of The Moscow Times Moscow Guide is entirely devoted to New Years celebrations. Seven great ideas for celebrating the “Night of Nights” will help readers finalise their plans and choose how and where to party, give fresh ideas and lots of practical advice.

And don’t forget – problems will come by themselves, but happiness and luck need an invitation. That why the more cheerful and light-hearted your celebration of the coming holiday is, the happier and more successful 2009 will be for you.

The Crisis: Signs of a Kremlin Fearful Of Unrest
Sociologist Yevgeny Gontmakher has painted a disturbing picture of what might emerge from the financial crisis, forecasting continued unemployment, huge protests and spreading violence.

Market Matters: Huge Grain Harvest No Boon for Farmers
This year Russia is enjoying the biggest grain harvest it has ever seen -- and farmers couldn't be more worried.



Tuesday, January 06, 2009 Updated at 31 December 2008 22:36 Moscow Time.

The Moscow Times » Issue 4001 » Business

Bailout Package Seen Not Saving All Banks

02 October 2008By Maria Levina / Special to The Moscow TimesDespite the bank bailout package swiftly introduced by the government, many Russian banks will face liquidity pressures and falling profitability as access to credit stays limited and rising rates lead to fewer loans and more defaults, banking analysts said Wednesday.

Big state banks such as Sberbank and VTB appear poised to become the industry winners in the short to medium term, although both have lost about 60 percent of their stock value since January.

They are the primary beneficiaries of the emergency loan extended last week to 28 banks by the Finance Ministry, pocketing $41 billion of the $60 billion aid package. They are also expected to see an increase in deposits as individuals and companies shift their money from other banks into safer, state-backed havens.

"We certainly expect more bank failures and a stronger role played by state banks," said Olga Naidenova, a banking analyst at Alfa Bank, one of the 28 banks.

Ruble deposits in Russian banks totaled 5 trillion rubles on Aug. 1, up 33 percent from a year earlier, the State Statistics Service said on its web site Wednesday. Sberbank held 47 percent of deposits by individuals, down from 49 percent last August, in an indication that the bank was losing market share prior to this month's banking turmoil but may now benefit from an unfolding crisis of confidence in the banking sector.

Sberbank's and VTB's key risks include exposure to dicey sectors such as real estate, retail and agriculture via their loan portfolios, but these risks are reduced by the fact that they are relatively well-diversified and have become the main conduits for state funds into the economy, UralSib said in a report.

Meanwhile, smaller banks will continue to face funding bottlenecks because the large and state banks are hesitant to take on smaller counterparty risk and are waiting for government guarantees before releasing liquidity to a wider group of banks, Renaissance Capital said in a report.

Banks with significant exposure to risky sectors and aggressive securities trading are likely to face additional pressure, becoming attractive targets for rivals with strong balance sheets, as the buyouts of KIT Finance and Renaissance Capital last week suggest.

The number of banks that will lose their licenses in the coming months will be in part a political decision because letting even a few small banks fail may cause a new crisis of confidence that will affect the whole banking system, Naidenova said.

"Big state banks are best positioned to acquire weaker players," she said. "But the question is whether they have interest in doing so now, when the quality of bank portfolios may not become clear until a round of real estate re-pricing."

The Central Bank is prepared to help the banking industry consolidate amid the liquidity squeeze, said the bank's first deputy head Alexei Ulyukayev told a conference Wednesday.

Mergers are a "rational and effective way of proceeding for shareholders," he said, Bloomberg reported. "We expect it and are ready to help this."