Russian Agricultural Bank boosts provisions 50% in Q2
MOSCOW. Aug 12 (Interfax) - Russian Agricultural Bank (RusAg) , the main lender to Russian agriculture, boosted provision charges for loan impairment 50% year-on-year in Q2 2104 to 18 billion rubles, the bank said in a quarterly report.
The bank made just 3.8 billion rubles in provisions in Q1 2014. It did not say what was behind the sudden increase in Q2.
The bank has said on several occasions that agriculture sector finances depend heavily on the weather conditions, which can affect the solvency of borrowers and the quality of loans.
"Given that lending to agriculture and related sectors forms the core of the bank's business, the quality of the loan portfolio and the volume of loan loss provisions depends on the development of these factors and on the financial state of borrowers from these sectors," the bank said in the report.
RusAg provisioned 23.5 billion rubles for bad loans in 2013, 2.7% less than in 2012.
RusAg is one of the banks to have been hit by U.S. and EU sanctions against Russia and has been shut off from the American and European capital markets.
The bank had been busy on the domestic and foreign debt markets: borrowings amounted to 1.5 trillion rubles as of July 1.
Russian Foreign Minister Sergei Lavrov said on August 11 that the sanctions against RusAg, which made it difficult for the bank to lend to farmers, were partly to blame for Russia's embargo on certain food imports.
The Russian authorities are ready to recapitalize RusAg by 77 billion rubles by 2020. The bank also plans to issue 25 billion rubles worth of preferred shares for the conversion of a subordinated credit received from Vnesheconombank (VEB) during the financial crisis.
The Vedomosti newspaper has said had asked the state to replace external funding with deposits from the National Welfare Fund. The paper's sources said the bank needed 100 billion rubles in deposits. Agriculture Minister Nikolai Fyodorov said last week that this subject "not materialized today."
RusAg was Russia's sixth largest bank by assets, according to the Interfax-100 ranking at the end of H1 2014.
