EEDB’s Chairman of Management Board Dmitry Pankin gives an interview to RIA NovostiDB’s Chairman of Management Board Dmitry Pankin gives an interview to RIA Novosti

Plans to increase the Bank’s loan portfolio in 2017

In 2017, Eurasian Development Bank (EDB) plans to increase its current loan portfolio by 30%, to US $3 billion, Chairman of the Management Board Dmitry Pankin said to RIA Novosti at the Russian Investment Forum in Sochi.

The bank’s loan portfolio is rather big already, he believes, saying that, “Our current loan portfolio, or signed loan agreements, totals US $2.4 billion and the actually extended loans stand at US $1.7 billion.” The banker expects that the loan portfolio will grow by 25-39% by the end of the year. “A part will be repaid. I believe it will be around 30 per cent. We should raise it to US $3 billion,” Pankin says.

“I think that we will have profit surely, but it is not our main goal. I mean we don’t have a task to exceed the last-year US $160 million. Last year, we managed to achieve it by reducing our provisions, and we worked with our portfolio, which gave as around US $60 million. This year, I think, it will be some US $60 to 70 to 80 million, in that range,” he added and emphasised that the main task was to enhance the investment portfolio significantly.

“This year it is important to increase the actual investment portfolio. Last year, we worked on sophisticating our project activities. We had to make major internal changes in the bank: we had to dismiss some employees and hired new specialists to tune up the work of the project group to the sectoral principle,” Pankin also told.

According to him, EDB now has three project groups: for the power sector, infrastructure and industries. “Our search for projects has also become more effective: we have reversed the shrinking of the bank’s loan portfolio. Now I see significant prospects. We are considering projects for approximately US $1.2 billion that may be signed this year, out of which we expect to finance around US $1 billion this year,” he explained.

At present, EDB’s shareholders account the following portions of the loan portfolio: Kazakhstan 45.4%, Russia 33.4%, Belarus 18.4%, while the remainder is distributed between other shareholders (Armenia, Kyrgyzstan and Tajikistan) and other countries. “To be honest, Russia should account for more. Not by reducing Kazakhstan’s portfolio, of course, but by increasing the share of loans in Russia. We should run large-scaled projects in Russia,” Pankin concluded.

Tenge-denominated bonds

This year Eurasian Development Bank (EDB) plans to issue tenge-denominated bonds in Kazakhstan for a total of US $100-150 million, head of the development institution Dmitry Pankin said RIA Novosti at the Russian Investment Forum in Sochi.

“We plan to issue tenge-denominated bonds and will use these resources for lending,” he said and added that the raised amount will be US $100-150 million. The bank does not plan to have other borrowings this year. “We have foreign exchange resources we can work with,” Pankin said.

According to him, Kazakhstan is one of the backbone players in EDB, accounting for almost half of the bank’s loan portfolio.

“The National Bank of Kazakhstan’s help to us is very important. We have a loan facility in the tenge from Kazakhstan. This means we bring a list of projects, the National Bank approves them and we obtain a loan facility for these projects,” he explained. “We do not have anything similar in Russia,” the head of EDB noted.

He also said that Kazakhstan’s economy and financial market have stabilised and allow borrowing.

“They (RIA: the National Bank of Kazakhstan) have tried for a long time to maintain the tenge rate artificially. This has led to many difficulties: everyone expected that the tenge would devaluate, some businesses simply stopped working, everyone bought goods in Russia using the inflated tenge rate. As a result, Kazakhstan’s economy has been affected. It was impossible to make long-term forecasts or investment decisions. The situation has stabilised now and placements have become possible,” he said.

The Russian Ministry of Finance’s planned internal borrowing programme for the year

Russia’s Ministry of Finance may not fulfil its internal borrowing programme for the current year in full if oil prices remain high, Dmitry Pankin, head of Eurasian Development Bank, believes.

“If oil prices stand at US $56 per barrel, as they do now, while the budgeted figure is US $40, I believe there will be no need in such an amount of federal loan bonds,” Pankin said to RIA Novosti at the Russian Investment Forum in Sochi.

The Ministry of Finance has planned a large-scale internal borrowing programme for this year, with net borrowings, as per the budget law, to reach RUB 1 trillion.

In April, the Ministry is ready to launch federal loan bonds, a new instrument for individuals. It plans to place these instruments twice a year, for US $20-30 billion annually. Individuals will be able to buy the securities by opening special investment accounts with participant banks. Return on them will be higher than on bank deposits or other Ministry of Finance’s bonds.

Pankin believes such federal loan bonds can compete with deposits at Sberbank, which is currently the leader in Russia in terms of individual deposits. “It’s quite a healthy idea. Placing them in this market is beneficial for the seller,” he said.

A special regional rating scale for EAEU countries

Dmitry Pankin, head of Eurasian Development Bank (EDB), believes that introducing a special regional rating scale for the EAEU countries will only have sense if it becomes obligatory for them.

“If we have the respective rules, for example, that pension savings may be invested only in companies with a certain rating, or that only companies with a certain rating on the regional scale may participate in tenders, or, in other words, as concerns government regulation and administrative procedures, this idea can possibly be fulfilled,” Pankin said in an interview to RIA Novost at the Russian Investment Forum in Sochi.

Ekaterina Trofimova, head of the Analytical Credit Rating Agency (ACRA), in her speech delivered earlier at the forum proposed that a regional rating scale should be created in the EAEU to assess its companies and issuers’ credit ratings taking into account the region’s national specifics. She believes this will help to appraise companies’ condition in these countries more precisely since their international ratings are linked to sovereign ratings, some of which are, according to her, minimal.

Pankin said creating such a scale would be reasonable in the regulatory context. “There’s certain logic in that such a scale should be created and pension funds, for example, should be obliged to use it when placing savings. In this sense there is logic,” he said.

However, as for the market, he believes that the existing international ratings suffice.

Reducing the Central Bank’s key rate

Dmitry Pankin, head of Eurasian Development Bank (EDB), said in an interview to RIA Novosti at the Russian Investment Forum in Sochi, that if the Bank of Russia’s key rate is decreased this will weaken the rouble, but the decrease is needed.

“If the Central Bank reduces the rate, the rouble will weaken too. The dependence on oil prices also remains,” he said.

The current Central Bank’s rate is 10 per cent. In its recent statement the regulator said it would hardly soften its monetary policy in the first six months of the year.

“I believe it would be reasonable to reduce the rate, because we feel that the market is overheated. The high rates the Central Bank is maintaining in the market foster a short-term inflow of speculative capital. We see that many securities are overbought; federal loan bonds are overbought. Their prices are higher than required by the market,” Pankin emphasised.