Russian Press - Behind the Headlines, August 29

Kommersant
Banks Augment Reserves, Anticipate New Crisis

Russian banks are using profits to augment loan loss reserves in anticipation of a new wave of crisis expected to primarily hit small- and medium-sized borrowers.

Promsvyazbank, one of Russia's largest privately owned banks, tripled its first-half profits to 3.8 billion rubles ($120 million), according to a statement it made under International Financial Reporting Standards. Its results could have been higher if it had not had to increase its reserves against specific types of loanы, analysts say. The bank added 1.7 billion rubles ($53 million) to its loan loss reserves against loans to small- and medium-sized businesses.

Reserves against SME loans actually continued growing despite an improvement in the quality of those loans during that period. The proportion of non-performing loans in the bank’s SME portfolio shrank by 2 percentage points to 5.6%. However, a Promsvyazbank source said the bank had increased its loan loss reserves on fears of a new crisis.

“The markets are uncertain,” First Vice President Alexandra Volchenko said. “If they fall, SMEs and individuals will be hardest hit, so we decided to use our high profits to hedge our risks.” The move was largely a safety cushion, she added.

“I don’t like this term new wave of crisis,” Promsvyazbank CEO Artyom Konstandyan said in February. “Any crisis hits for a reason; the reasons behind what we are witnessing now date back to the mid-2000s.”

Promsvyazbank began focusing on SME lending at the beginning of last year, as did many other private banks. NOMOS-BANK adopted a similar strategy: its SME loan portfolio grew by 57.8% in 2011, while its total corporate loans increased by only 26.9%.

The interest in smaller borrowers was caused by the growing competition from state-controlled banks for large corporate borrowers, which sent down profits in the large corporate segment. SME loans continued to be issued at a higher rate of interest, but the risks were significantly higher as well.

“Private banks’ tendency to overdo SME services may significantly undermine a number of private players if another financial crisis hits,” the Interfax Center for Economic Analysis (CEA) wrote last month.

Promsvyazbank seems to have recognized this danger and has started moving away from this risky segment. Its SME loan portfolio has grown by 7% to 41 billion rubles ($1.3 billion) since the beginning of the year, while its total corporate loans increased by 10.2% to 318 billion rubles ($9.9 billion).

“Many banks are currently augmenting loan loss reserves and winding up their work with SMEs,” said Yulia Safarbakova from the BCS financial group.

Mikhail Matovnikov, general director of Interfax-CEA, said probably more banks would like to build up additional reserves against their SME loans. But few of them are in a position to do so like Promsvyazbank without sliding into the red, he added.

Komsomolskaya Pravda
Pirates Seize Greek Oil Tanker with Russian Crew

The crew members of a Greek oil tanker seized by pirates in the Gulf of Guinea off the coast of Togo are citizens of Russia, International Maritime Bureau official Noel Chung said on Tuesday. The capture occurred about 30 kilometers from Lome, the capital of Togo.

Chung said that the ship Energy Centurion issued a distress call, the Togo Coast Guard proceeded to the location of the capture, where a firefight ensued between members of the coast guard and the pirates. The pirates escaped in the captured vessel and headed towards Benin.

“These are not pirates who are after a ransom, but robbers who are occupying the ship in order to steal the cargo,” said a representative of the management company Golden Energy Management, whose headquarters are in Athens. “Therefore, we hope that they will free the vessel once they’ve siphoned off the diesel.”

“Pirates in the region typically hold the ship for four to five days and take some of the cargo – usually the diesel,” Chung said.

The tanker, which an official at the Greek Maritime Trade Ministry confirmed on Tuesday is registered in the Isle of Man, has a crew of 24.

This was the second such pirate attack in the last two weeks in the Gulf of Guinea.

Nezavisimaya Gazeta
Smolensk Court Sentences Opposition Activist to Eight Years

On Tuesday, the Zadneprovsky Сourt in Smolensk sentenced Taisiya Osipova, an activist from the Other Russia party, to eight years on drug possession charges. Her lawyers said they will contest the ruling. Human rights champions say the court decision fits in with the authorities’ strategy of intimidating dissenters.

Opposition leaders were among the first to comment on the court decision. Left Front Coordinator Sergei Udaltsov wrote in his microblog: “Taisiya Osipova has been given eight years, even though the prosecutor asked for four. This is a triumph of lawlessness and cynicism. Where are the authorities pushing the people?” Ilya Yashin, co-chairman of the Solidarity movement, wrote: “The court has given Taisiya Osipova eight years, double what the prosecutor was demanding. This is a kangaroo court.”

Osipova was arrested on November 25, 2010, for possession of heroin. Her lawyers and her party claimed that she was framed in order to put pressure on her husband, Sergei Fomchenkov, a member of the Executive Committee of the Other Russia. They said the drugs were planted on her by officers and that witness testimony was fabricated. They suggested that witnesses should undergo a lie detector test. Osipova herself passed such a test, yet the court sentenced her to 10 years in a low security prison colony in 2011.

In early 2012, then-president of Russia Dmitry Medvedev said the sentence was too harsh “even if she is guilty.” He admitted that drugs are sometimes planted to force suspects to testify. On March 5, 2012, Medvedev instructed the Prosecutor General’s Office to analyze 32 court rulings, including the one on Osipova’s case, for their legality and soundness.

Her lawyers and supporters hoped that her sentences would subsequently be reduced. Her husband Sergei Fomchenkov wrote in his microblog: “Our daughter waited for her mom to be released.” He says that this is a frame-up and that sentencing anyone to eight years for possession of 1.2 grams of heroin when people charged with possessing whole kilograms of the stuff are released creates a dangerous precedent.

Head of the Moscow Helsinki Group Lyudmila Alekseyeva told Nezavisimaya Gazeta: “This is terrible – an ill woman [Osipova has diabetes] and the mother of a small child has been sentenced to eight years even though the evidence against her is highly controversial.” Alekseyeva said that this is an attempt to “intimidate society” and is a logical consequence of nearly all the trials of dissenters, as well as the hastily adopted laws on NGOs, assemblies and blacklisted Web sites. “Under the Constitution, the courts and the legislative branch must be independent of the executive branch, but not in this country,” the human rights leader said.

Alekseyeva believes the worst part is that the authorities are trying to split society and pit one part against the other: “Believers are being forced into a conflict with nonbelievers; workers are being pitted against the middle class and political movements against each other. This will not end well.”

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