Russia plans to inject $27 billion into banks

* Sberbank, Russia’s biggest lender, likely to receive 500 billion-rouble subordinated government loan

MOSCOW: Russia plans a 900 billion-rouble ($27.4 billion) capital injection for commercial banks hit by the economic crisis, with state-controlled lenders set to receive the largest share, government sources said on Tuesday.

Sberbank, Russia’s biggest lender, was likely to receive a 500 billion-rouble subordinated government loan, one source told Reuters, citing a decision taken at a meeting of the government’s anti-crisis committee.

Russia’s government has already allocated over $200 billion, spending some of the oil wealth accumulated over the last decade, to cushion an economy widely forecast to be heading into recession this year.

Major players among the country’s 1,000-plus banks have been charged with ensuring the cash reaches the real economy, keeping money markets ticking over and filling holes left by the dearth of foreign funding during the global credit crunch.

The government source, speaking on condition of anonymity, said another state-controlled bank, No 2 Russian lender VTB, would get 200 billion roubles as part of the latest rescue package.

Other commercial banks would share a total of 100 billion to 200 billion roubles. Privately owned banks are waiting to find out the criteria for loan applications before deciding whether to apply for the state funds.

Finance Minister Alexei Kudrin has said the government would allocate $40 billion in 2009 to help the banking sector get through the crisis, as the deteriorating quality of assets puts pressure on banks’ profitability and capital adequacy ratios.

The government said the anti-crisis committee, chaired by First Deputy Prime Minister Igor Shuvalov, had met to specify the amount of finance needed to increase banking capital. It did not give any more detail.

Russia’s central bank expects the share of non-performing loans in commercial banks’ loan portfolios to rise to 4.0-4.5 percent in the first quarter of 2009. Russian banks have been lobbying for Tier 1 capital injections, such as direct equity-stake purchases by the state. reuters

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