Azernews.Az

By Bloomberg

Russian government bonds fell and stocks dropped as oil retreated for the eighth time in nine days and slumping profit at the nation’s second-biggest lender raised concern that high interest rates are crimping credit growth.

The Micex stock index fell 0.9 percent to an almost two- month low as VTB Group lost 1.6 percent. Crude oil, Russia’s main export earner, dropped to a one-month low in London. The ruble was little changed at 62.33 to the dollar, 41 percent lower over the past 12 months. Yields on local-currency bonds due February 2027 climbed 27 basis points to 12.96 percent, a two-week high.

VTB posted a 96 percent decline in 2014 profit on Friday, citing the ruble’s collapse last year and rising central bank interest rates, which were increased to 17 percent in December from 7.5 percent in June. VTB welcomed the Bank of Russia’s 100 basis-point reduction in its key rate to 14 percent on Friday, yet said it was insufficient to revive lending.

“This is the result of heightening uncertainty around oil,” Olga Naydenova, a banking analyst at BCS Financial Group in Moscow, said by e-mail. “What VTB showed on Friday raises concerns about the ability of this business to generate any value for shareholders at all.”

Banks may be the first to suffer as the Russian economy contracts this year. Moody’s Investors Service warned March 2 that lenders’ losses from delinquent debt may be higher than in 2009 when Russia’s economy shrank 7.8 percent. Gross domestic product will decline 4 percent in 2015, according to the median of 40 estimates compiled by Bloomberg.

Tax Payments

Sberbank shares slid 2.2 percent to 66.03 rubles at 3:34 p.m. in Moscow, while VTB dropped to 6.23 kopeks. The dollar- denominated RTS Index declined 2.1 percent to the lowest since Feb. 6.

VTB’s tier-1 capital declined to 9.8 percent and warrants additional support from the government on top of 314 billion rubles ($5 billion) already provided last year, Alfa-Bank analyst Marina Karapetyan said in an e-mailed note on Monday.

While Friday’s interest-rate cut was in line with the median forecast in a Bloomberg survey of economists, more than half the currency, rates and bond traders polled by the Tradition brokerage predicted a cut of at least 150 basis points. The ruble fell 1.7 percent on the day of the decision, while 2027 yields climbed 16 basis points.

Russian companies will pay about 1.3 trillion rubles in taxes this month from today, with the heaviest payments coming on March 25, according to a survey of five economists, conducted by Bloomberg.

“As the tax period starts today, sales of foreign currency may support the ruble in the short term,” PAO Rosbank analysts led by Yury Tulinov wrote in an e-mailed note.