Estimates Slashed for Lenders

Credit Suisse Group cut its price estimates for shares of Russian banks on Thursday, saying credit-default swaps on their debt indicate greater risks to holding the shares.

The Swiss bank cut its price estimate for shares of Sberbank, the country's biggest bank, 17 percent to $4.30, while Global Depositary Receipts of VTB Group, the country's second-biggest bank, were reduced 20 percent to $7.20.

Credit-default swaps on Sberbank's debt climbed to more than 200 basis points from less than 100 basis points at the beginning of August, while contracts on VTB's debt rose to almost 350 basis points from just over 100 basis points in the same period, Credit Suisse said.

The fact that debt investors have to pay more to protect their bonds from default indicates "a changing risk appetite for these specific stocks," Credit Suisse analysts Hugo Swann and Nan Li wrote in a report dated Thursday.

Credit Suisse kept its recommendation on Sberbank shares at "outperform" and on VTB at "underperform."

Credit-default swaps are financial instruments based on bonds and loans, and are used to speculate on a company's ability to repay debt. They pay the buyer face value for the underlying securities or the cash equivalent should a borrower fail to keep to its debt agreements.

An increase indicates worsening perceptions of credit quality, and a decline points to an improvement.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.