INTERVIEW: CBR expects inflation at 5.5% Jan–Sep, up to 7% in 2011

INTERVIEW: CBR expects inflation at 5.5% Jan–Sep, up to 7% in 2011

MOSCOW, Jul 7 (PRIME) -- Russia’s consumer price inflation is expected to amount to 0.5% in July–September, up to 5.5% in January–September, and up to 7% in 2011, the Central Bank of Russia’s (CBR) First Deputy Chairman Alexei Ulyukayev said in an interview with PRIME Thursday.

“We will likely have inflation at up to 5.5% after nine months (January–September) and up to 7.0% for the entire year,” Ulyukayev said. He added that the pace of inflation was slowing due to a decrease in the growth of the money supply, as well as the stabilization of world prices on energy resources and food products, and the strengthening of the Russian ruble.

Speaking about the macroeconomic situation in the country, Ulyukayev said that Russia had recorded a net capital inflow of U.S. $3 billion in June. “However, there is no need to overestimate this fact, (because) no major turning points came. June is always a more positive month in this respect as companies are paying dividends,” he added.

Speaking about the banking sector, Ulyukayev said that Russian banks’ combined loan portfolio grew 8.3% in January–June, under preliminary data.

Commenting on a recent statement by Presidential Aide Arkady Dvorkovich, Ulyukayev said that the CBR did not plan to fundamentally change the structure of its foreign exchange and gold reserves. However, the CBR plans to start investing in Australian dollars later this year and this could lead to a slight decrease in the volume of investments held in other currencies, he said.

“As we are starting to invest in Australian dollars later this year, the volume of investments into operations with other currencies will slightly decrease, but this will be within a tenth of a percent,” Ulyukayev said. The bank purchased around U.S. $4 billion on the domestic market in June, he also added.

Separately, Ulyukayev said that earlier approved measures aimed at bailing out the Bank of Moscow were not expected to impact inflation and liquidity on the market. Moreover, state-controlled VTB Bank’s plans to inject 100 billion rubles into the Bank of Moscow are unlikely to significantly affect the liquidity of VTB Bank, as most of the funds will be allocated from VTB Bank’s profit for 2011, he said.

(27.8907 rubles – U.S. $1)

End

http://www.bne.eu/dispatch_text16100

VTB Capital

News: The CBR's interventions on the FX market moderated to USD 4.0bn (USD 3.2bn and EUR 0.5bn) in June, from USD 4.5bn (USD 3.9bn and EUR 0.4bn) in May. In the week ending 1 July, the CBR's reserves climbed to USD 526.7bn, from USD 524.3bn in the previous week, having increased USD 5.6bn in June and USD 47.3bn YTD.

In separate news, the rouble real effective exchange rate (REER) appreciated 1.2% MoM in June despite weakening in nominal and real terms against USD and EUR.

Our View: Most of the increase in the CBR's reserves can be explained by the currency and gold revaluation. This implies that the monetary authorities abstained from interventions on the FX market in the last week of June.

The size of the interventions in June was very similar to that in April-May, suggesting that the balance of payment dynamics were similar (unless the CBR changed the intervention rules). At the same time, the 2Q11 balance of payment data implies capital inflows in June, instead of the hefty capital outflows as was the case in April-May.

We attribute the rouble REER appreciation in June to the sharp depreciation in the Belarus rouble (BYR).

http://www.bne.eu/dispatch_text16100

Renaissance Capital

Event: Today (8 July) Vedomosti quoted Central Bank of Russia (CBR) Deputy Chairman Gennady Melikyan as saying that, according to the CBR's preliminary estimates, corporate lending in the banking sector (excluding Sberbank) was up 1.9% MoM in June, while retail loans (excluding Sberbank) grew 2.3% MoM. On our estimates, these numbers imply that the sector's (excluding Sberbank) total loan book added c. 2.0% MoM in June. To recap, yesterday (7 July) Kommersant reported, citing Sberbank Deputy CFO Alexander Morozov, that Sberbank's loan book increased 8% in 1H11 (implying c. 1.3% MoM loan growth in June, on our estimates).

Action: Moderately positive for the sector, in our view.

Rationale: The preliminary estimates suggest that the sector's loan book was up approximately 8-9% in 1H11 and the trends of recent months largely continued in June: the sector's credit portfolio saw rather robust growth of around 2% MoM, with retail loan expansion once again outpacing corporate loan growth. Sberbank is expected to publish headline numbers from its 1H11 results under RAS on 13 July; the full sector's stats will be published by the CBR by the end of this month.

Svetlana Kovalskaya

Central Bank to issue extra shares for BoM bailout

http://www.rbcnews.com/free/20110708115227.shtml

      RBC, 08.07.2011, Moscow 11:52:27.The Central Bank of Russia (CBR) will issue additional shares to bail out the Bank of Moscow (BoM), RBC Daily reported today, citing CBR First Deputy Chairman Alexey Ulyukayev. Using the proceeds from the offering, CBR will extend a RUB 295bn (approx. USD 10.54bn) loan to Deposit Insurance Agency, which will help rescue the distressed lender, Ulyukayev said. The offering will not have a negative impact on money supply or the economy, since these funds will be invested in federal government bonds in the future, he added.

      VTB, the major shareholder of BoM, is expected to use its 2011 net profit to inject RUB 100bn (approx. USD 3.57bn) in BoM, Ulyukayev also said. VTB's net profit is projected to exceed RUB 80bn (approx. USD 2.86bn) this year. The remainder could be taken from VTB's shareholder equity, which totaled 486.6bn (approx. USD 17.38bn) as of June 1.