Dmitry Patrushev, Chairman of the Board and CEO of Russian Agricultural Bank (RusAg) spoke to RIA Novosti correspondent Tatyana Chubasova about the Bank’s plans to grow business in slowing economy.
RusAg is the leading lender to Russia’s agribusiness. The Bank has provided RUB 2.5 trillion in loans for the industry development.
— RusAg has received state capital contributions for a few years in succession. Is there a need, and what size is needed, for capital injection this year?
— I wouldn’t call these contributions state support. Rather these are state investment in agribusiness and rural areas development. Agriculture is the industry that receives state support in all countries, and I don’t think Russia is an exception. RusAg was established as a vehicle of state policy implementation in agribusiness, as a market mechanism for state support of agribusiness. We receive state support in the form of capital contributions for agribusiness financing and for investment projects implementation in this sphere. Besides, the capital contributions allow us to manage the downside risks that arise when we finance this industry.
In my view, we have been quite successful in fulfilling the tasks given to us. Since the start of the implementation of the National Priority Project on Agribusiness Development and further on in the course of the State Program on Agribusiness Development, the Bank has provided more than 1,7 million loans totaling RUB 2.5 trillion. Each rouble contributed to the Bank’s capital by the state is multiplied by around 8-9 roubles attracted from our investors and allocated for economy and agribusiness development. Capital contributions are stipulated in the Bank’s Strategy that is directly synchronized with the State Program on Agribusiness Development. Currently the plans for further capital contributions are being dicussed. Vice premier Arkadiy Dvorkovich mentioned that in the near term authorities will work out a systemic decision that will provide for successive investments over a number of years in the Bank so it can pursue its goals.
— What are your plans for loan portfolio growth taking into account the economic slowdown and geopolitical risks?
— While setting our key business targets for 2014 we, of course, included the assumptions of the slowdown in growth rates and business activity. We took into account industry and external risks that can affect credit ‘appetite’ of our borrowers, as well as state programs and indicators set forth therein. Given current economic and political situation, I think, that loan growth will not exceed 10%.
— RusAg has USD 1 billion Eurobond maturing in June. Will the Bank tap capital markets to refinance the debt or will repay it?
— We have a quite comfortable international debt repayment schedule. This is the only issue of Eurobonds which matures in the coming 15 months. We will monitor the market, economic and political situation. If opportunity arises, we will access the market, in case it does not - we have reserves sufficient to repay the debt.
— What are your borrowing plans for 2014?
— We will anyway try to remain a player in financial markets and will closely watch market conditions. RusAg does not have aggressive financial markets borrowing plans. We now rather focus on increasing share of client deposits in funding sources.
— How will rating downgrade affect RusAg’s operations?
— It’s obvious that rating agencies strongly influence the possibility of accessing international capital markets and borrowing costs. In case Russian sovereign rating is downgraded and so are the corporate ratings of state-related issuers, we will face increased borrowing costs in international markets. Currently, Russian companies have limited, to say the least, access to international capital markets mainly because of political factors.
— The CBR has increased the key rate twice in March and April. How will these decisions influence RusAg’s lending and deposit rates?
— RusAg manages its interest rates based on real economic conditions for borrowing and depositing of market funds. The CBR’s actions can’t but influence the environment where all market participants work. Lending and deposit rates will be determined by the market conditions in general, and we will follow the market trend. Market rates will rise, so, we will raise rates as well.
Source: RIA Novosti