Five-year plan from VEB

Development Bank will increase its loan portfolio to 850 billion rubles

The Bank for Development and Foreign Economic Affairs (VEB) has prepared a development strategy until 2012. As the head of the state corporation, Vladimir Dmitriev, told reporters yesterday, VEB intends to quadruple its loan portfolio by this date - to 850 billion rubles. The bank's supervisory board has already approved 11 investment projects with a total volume of 140 billion rubles.

Among the major transactions in the near future is the completion of the redemption of an additional share issue of the United Aircraft Corporation (UAC) and the transfer to it of a 5 percent stake in the European aircraft manufacturing concern EADS. As previously reported, in exchange for 5% of EADS, Vnesheconombank may receive 15% of UAC shares. At the same time, VEB will consolidate the state stake in the leasing company Ilyushin Finance, which is currently divided between the Development Bank and UAC. VEB plans to complete these transactions in the second half of 2008. “By consolidating the IFC package, we could facilitate UAC’s entry into an IPO without non-core assets,” said Vladimir Dmitriev.

Another major deal, also included in the plans, is obtaining a blocking stake in Inter RAO UES by purchasing its additional issue in the amount of 20 billion rubles. “We are raising the issue of acquiring an additional issue of shares in Inter RAO UES,” said Mr. Dmitriev. Increasing the capitalization of this company will allow it to participate in large international projects, tenders for the acquisition and management of foreign assets.” The overall program of interaction between the Development Bank and the energy company could “cost 30 billion rubles.” Among the projects already being implemented by the state corporation is the creation of a timber processing complex in the Boguchansky district of the Krasnoyarsk Territory as part of the investment project “Comprehensive Development of the Lower Angara Region”. The bank will invest 40 billion rubles in this project. In addition, VEB is participating in a project to create a production of semiconductor components in Zelenograd on the basis of the Angstrem plant. The bank opens a credit line to finance the project in the amount of 815 million euros for a period of nine years. Among the infrastructure projects is the development of water supply and sanitation infrastructure in the Rostov region, initiated by Eurasian OJSC. The total cost of the project is 41.5 billion rubles, VEB is providing a credit line in the amount of 4.5 billion rubles. for a period of 14 years.

VEB's own capital now amounts to more than 200 billion rubles. By 2012, the state corporation intends to borrow about 830 billion rubles from the markets. In addition, the bank receives profit, which can also be used for lending. In 2007, it amounted to about 8.3 billion rubles.

VEB places temporarily available funds on the market to maintain liquidity in the banking system. The terms of deposits, initially limited to one month, were then increased to three. According to Mr. Dmitriev, the state corporation placed 115 billion rubles on deposits of ten commercial banks. The deposit limit for one bank is no more than 50 billion rubles, Dmitriev clarified. The funds were placed in banks with credit ratings from at least two international agencies. These include Sberbank, VTB, Alfa Bank, Gazprombank, Rosselkhozbank, Bank Vozrozhdenie. As Vladimir Dmitriev said yesterday, after VEB entered the interbank market, interbank lending rates decreased by about one percentage point. The head of VEB also said that part of the funds placed in these banks in the second half of the year could be withdrawn from deposits and used to finance investment projects.

However, banks have another chance to receive VEB’s money into their accounts. As you know, the state corporation, which is also a state management company, has been declaring for many years the need to expand its investment portfolio. Currently, VEB is limited in investing pension savings, and therefore it is difficult for it to provide income on them that compensates for inflation. “We are raising the question of expanding the investment declaration and the possibility of differentiating the instruments in which we could invest the funds of the silent ones,” noted Vladimir Dmitriev. Currently, VEB manages 360 billion rubles. pension savings, of which about 90% are funds of “silent people”. In his opinion, part of this money, about 90 billion rubles, can be invested in deposits of commercial organizations. According to Mr. Dmitriev, such banks can be selected based on the availability of appropriate ratings from international agencies: “This will be a serious resource for solving urgent problems with strengthening the liquidity of banks.”

As is known, VEB proposes to expand the list of instruments to include bonds of highly reliable borrowers, primarily state-owned companies, and also to remove restrictions on investing in mortgage bonds (currently VEB can only invest in mortgage securities with a state guarantee). “We do not share concerns about the strengthening of VEB’s role as a player in the stock market in the event of an expansion of the investment declaration,” Mr. Dmitriev said, noting that the scale of investment and financial markets corresponding to the needs of the Russian economy far exceeds what has so far banks and companies are able to provide. “There is plenty of space for everyone,” concluded the head of Vnesheconombank.

Ivan GORDEEV