Page 72 - RUSRptOct18

Ezubov with a stake of 16%, exited the capital of the company, Vedomosti daily reported on September 18. Forbes and RBC business portal previously linked Ezubov to tycoon Oleg Deripaska, with the sanctioned Kremlin insider reportedly being Ezubov's cousin.
AFK Sistema's major shareholder Vladimir Yevtushenko (64.2%) has said he is not ready yet to sell its remaining stake in MTS Bank to MTS. Earlier this summer MTS acquired 28.63% of MTS Bank for RUB8.27bn, increasing its stake to 55%. Later, several sources reported that MTS may further increase its stake by buying the remaining 43% of the bank from Sistema for RUB12bn. As we commented earlier, the sale of MTS Bank would help Sistema to reduce its debt burden and comply with its dividend policy sooner. For MTS, the purchase of the bank would reinforce its digital ecosystem. We do not regard the deal as entirely off the table, and therefore neutral for Sistema.
Russia's state development bank Vnesheconombank (VEB) will start to form syndicates with commercial banks to increase the number and volume of investment projects under its mandate, Vedomosti d aily reported on September 23 citing deputy heads of VEB Nikoli Tsehomsky and Yuri Korsun. This year Kremlin is attempting to revamp VEB from a failing development institution into a major financial hub in President's Vladimir Putin's spending drive under its newly appointed head Igor Shuvalov. However sanction risks shadow hang over these plans, as in the end of August VEB's bonds came under intense sell-off pressure amid renewed talks of "crushing" bipartisan sanctions bill introduced to the US Congress earlier that month that are due to be considered in November. Nevertheless, VEB that was on the brink of default in 2015-2016 overburdened by loans issued for Sochi Olympics construction and hit by sanctions, is seen as the "main instrument of implementing Putin's May's Decrees,” according to PM Dmitry Medvedev, Vedomosti r eminds. VEB will no longer act as the only creditor of the investment projects and will start attracting syndications from commercial banks. Reportedly Sberbank, Gazprombank, and VTB state major banks are the main interlocutors of VEB, but over 10 banks have signed a memorandum on potential co-financing with VEB. Reportedly VEB is ready to absorb market risks, price cycles, inflation, overspending, and other risks, as well as endow projects with state credit guarantees and subsidies from the Finance Ministry, to make the projects more attractive for traditional commercial banks. Out of RUB1.8 trillion portfolio of VEB, project financing accounts for over a half. After the appointment of Shuvalov, the bank started shedding non-core assets, could require an additional RUB1 trillion ($16bn) capital injection over the next five years, and also could get a part of the RUB3.5 trillion Growth Fund to be established in 2019. The bank will also be allowed to become a major player on the pension fund market.
8.2 Central Bank policy rate
The Central Bank of Russia (CBR) surprised analysts by hiking its monetary policy rate by 25bp to 7.5% on September 14 -- the central bank’s first increase in interest rates since 2014 .
The increase was in reaction to recent emerging market volatility, ruble weakening, and sanction pressure on Russian assets. The last time the CBR hiked rates was an emergency rate hike in 2014 to 17% to stem the meltdown of the ruble after oil prices crashed that November.
72 RUSSIA Country Report October 2018 www.intellinews.com