EBRD bolsters Troika as banking system battens down the hatches

The European Bank of Reconstruction and Development has approved a $150 million five-year loan for Troika Dialog as part of the development bank’s $500m package to buttress Russian banks against a second wave of bad debt, which is expected to peak in two months time.

The loan comes three months after South Africa’s Standard Bank took a 33% stake in the Moscow investment bank in a $200m deal, which increased the bank’s capital base to $850m.

The IFC, the World Bank’s investment arm, last week announced plans to invest $200m to buy stakes in Russian banks struggling with a second wave of bad loans. Senior bankers in Moscow have forecast that non-performing loans could hit 20% by the end of year. The Russian Central Bank maintains that bad loans are unlikely to exceed the threshold of 10-12% of the banks’ total loan portfolio.

A spokesman for the EBRD in Moscow said: “We have already committed $500m in subordinated loans to Russia’s banking system and to boost their capital bases. A total of $5bn has been designated to Russia  which represents a 20% increase.”

Pavel Teplukhin, president of Troika Dialog, yesterday told the Prime-Tass press service the problem of bad debt in Russia’s banking sector will hit a peak during August to September.  “At that time, the problem of bad debt will intensify, and it will be necessary to make a decision on the capitalization of Russia’s banking system,” he said.

A spokeswoman for Troika Dialog in Moscow said the $150 loan from the EBRD would support the bank’s trading and brokerages activities and reduce its dependency on the repo-market for short-term lending. “The funds received from Standard Bank are aimed at the development of our commercial banking business.”

The facility will consist of two separate tranches and the funding will support Troika’s trading and brokerage activities.

The EBRD, which has previously invested $35m in Troika’s private equity arm, opened a three-year credit line in November 2007 worth $100m. A spokesman declined to comment on the terms of the new loan.

The new loan, which will consist of two separate tranches, require a single repayment at maturity.

Nicholas Tesseyman, the EBRD’s business group director for financial institutions, said in a statement: “It will thus contribute to the stability and liquidity of local capital markets while advancing the Bank’s long-term agenda of encouraging the development of financial intermediation in Russia.”

Troika, which is currently re-organising its business lines to integrate it with the Standard’s Moscow-based operations, has cut costs and staffing by 35% since last Autumn’s bank crisis.

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