Russia 100811 Basic Political Developments

Mortgage Lending Doubles

http://www.themoscowtimes.com/business/article/mortgage-lending-doubles/412128.html
11 August 2010

Mortgage lending more than doubled in the first half as record-low interest rates and growing incomes boosted demand, Central Bank data show.

The value of ruble-denominated home loans issued in the six months through June rose to 125.9 billion rubles ($30.1 billion), compared with 52.4 billion rubles during the same period last year, the Central Bank said on its web site Tuesday.

A total of 105,609 mortgages were made in the first half at an average rate of 13.5 percent, a decline of 1.1 percentage points from 2009, the Central Bank said.

(Bloomberg)
Monetary base declined in July

http://www.businessneweurope.eu/dispatch_text12479

Renaissance Capital

August 11, 2010

Yesterday (10 Aug), the Central Bank of Russia (CBR) published data on the broad monetary base for July. According to the data, the broad monetary base reached RUB7.11trn in July, down from RUB7.24trn in June. The monetary base declined for the first month since January, and this decline is unexplained by technical factors. In January, the numbers were distorted by the effects of the New Year holidays: the banks accumulated money in December to get through the long holiday period.

In July, the movement was driven by a change in commercial banks' deposits with the CBR. Bank deposits fell almost 50%, to RUB350bn in July from RUB637bn in June. Other monetary base components expanded again: cash surged 2.4% MoM to RUB4.95trn; and OBR holdings rose to RUB1.04trn in July, from RUB1.00trn in June; meanwhile, correspondent accounts were unchanged at RUB605bn.

We explain this movement in the monetary base by a couple of factors. First, the previous monthly increases in the monetary base were strongly correlated with the volume of the CBR's interventions in the FX market. In July, they were only $0.46bn. Second, budget spending traditionally accelerates at the end of the year; thus, the use of the Reserve Fund for deficit financing is low in the early part of the year, and only RUB520bn has been withdrawn YtD. In July, the Ministry of Finance tapped neither the Reserve Fund nor the external market. As changes in the total amount of commercial bank liabilities to the CBR were immaterial, we estimate that money creation was close to zero in July. Therefore, the tax payment period negatively affected Russian liquidity in the banking system. As such, we think this event may signal that without FX interventions and budget-related monetary emission, the liquidity in the banking system may be volatile.

Anton Nikitin

Business, Energy or Environmental regulations or discussions

Norilsk Nickel, Sberbank, Silvinit: Russia Stock Market Preview

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=arVMZKC937dA

By Yuriy Humber

Aug. 11 (Bloomberg) -- The following companies may have unusual price changes in Russian trading. Stock symbols are in parentheses and share prices are from the previous close.

Russia’s 30-stock Micex Index fell 1.5 percent to 1,397.66. The dollar-denominated RTS Index fell 1.8 percent to 1,494.90.

OAO GMK Norilsk Nickel (GMKN RX): The nickel maker sold the metal at $341 a metric ton above the London Metal Exchange price in the first half, according to Deputy Chief Executive Officer Viktor Sprogis. Norilsk sold copper at $86 a ton above the average global price, Sprogis said to reporters in Moscow. Norilsk fell 0.5 percent to 5,158.29 rubles.

OAO Sberbank (SBER03 RX): Russian mortgage lending more than doubled in the first half as record-low interest rates and growing incomes boosted demand, central bank data show. The value of ruble-denominated home loans issued in the six months through June rose to 125.9 billion rubles ($30.1 billion), compared with 52.4 billion rubles during the same period last year, Bank Rossii said on its website today. Russia’s largest bank fell 1.1 percent to 82.66 rubles.

OAO Silvinit (SILV RX): OAO PhosAgro, the second-largest producer of phosphate-based fertilizers, has offered the state a stake in the entity that will be created should it merge with potash maker Silvinit, Interfax reported, citing unidentified people in the industry. Silvinit fell 3.9 percent to 18,693.42 rubles.

To contact the reporter on this story: Yuriy Humber in Moscow at [e-mail].

Last Updated: August 10, 2010 22:01 EDT

Drought May Spur Interest in Crop Insurance

http://www.themoscowtimes.com/business/article/drought-may-spur-interest-in-crop-insurance/412110.html
11 August 2010

Reuters

Swiss Re, the world's second biggest reinsurer, expects the current drought to spur interest in the nascent Russian crop insurance market as farmers re-evaluate the risk of crop failure.

"Nobody knows if the weather pattern that we see at the moment can repeat itself next year or just in 20 years, and I think this helps to raise awareness for financial risk management measures," Swiss Re director Reto J. Schneider said in an interview.

The Zurich-based company estimates that 25 percent of Russian crops are insured, well below the 80 percent level seen in the heavily subsidized U.S. market.

In lieu of insurance, many farmers continue to rely on government bailouts when crops fail, although the market has grown considerably since 2003, when insurance penetration was in the single-digits according to Swiss Re estimates.

Most farmers in the hard-hit Black Earth region say they had never used insurance but would consider it if the drought continues.

The government has sought to encourage the development of the crop insurance sector by providing a 50 percent subsidy on the premium for multi-peril crop insurance since 2003.

"They are promoting it and showing their positive intentions with the subsidy program," Schneider said.

However, farmers questioned in the Swiss Re report viewed insurance negatively, citing high costs and concerns about receiving payments on claims filed to insurers.

Independent and state-owned Russian forecasters have sharply reduced their 2010 wheat and overall grain crop estimates, but Schneider said it was too early to calculate the total losses.

"At this time it's not possible to make any type of clear forecast in terms of expected results because not all of Russia's territory is consumed by the drought," he said.

Swiss Re's 2010 results will only be affected marginally by the drought because reinsuring Russian agricultural insurers makes up only a small part of the company's premiums, which totaled 24.6 billion Swiss francs ($23.3 billion) last year.

Nonetheless, the company is confident that its business in Russia, as well as neighboring Ukraine and Kazakhstan, will grow as the agricultural sector expands.

Russia was the world's third largest wheat exporter last year, although its goal of remaining a top exporter was put on hold earlier this month when it banned exports until the end of the year.

"We very much believe in this market. This is soon going to be the breadbasket of the world because it's where the land is available," Schneider said.

Swiss Re has been active in the Russian agricultural reinsurance sector since 2005.

The company competes with "a handful" of the world's top-10 reinsurers in Russia, Schneider added.

"It's a challenge because it's a relatively young market," Schneider said. "Structures, processes and strategies must be developed and worked on."