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. Last Updated: 07/27/2016

Putin Tells Sberbank to Keep Lending

Government.ruPutin and Sberbank president German Gref, center, taking a tour of the state bank’s headquarters on Wednesday.

Prime Minister Vladimir Putin on Wednesday ordered state-controlled Sberbank to keep lending even as the bank reported a rise in bad loans.

The government is looking to banks, especially state-controlled ones, to help the economy out of its first recession in a decade with affordable loans. In return, the sector has been given billions of dollars of state funds to help boost their capital as bad loans rise and asset values fall.

“Of course, you need to improve the quality of loans, but you cannot close your portfolio, either,” Putin said during a visit to Sberbank’s headquarters.

“It’s very easy to just shut the box, it is harder to work with clients and understand which of them are reliable.”

The comments came minutes before Sberbank published its first-half results to Russian accounting standards, showing that profits tumbled 92 percent year on year to 5.3 billion rubles ($170.6 million).

Bad loans rose to 2.8 percent of its portfolio by the end of June from 2.6 percent at the start of the month.

Last month, Putin ordered state banks, including Sberbank, to boost loan portfolios by 150 billion rubles a month between July and September.

The government is also keen for banks to pass on the cuts in official interest rates — which have been slashed by 200 basis points since April — to their creditors.

“The level of 14 percent a year [interest on loans] is quite acceptable in current conditions,” Putin said Wednesday. That represents a 3 percentage point premium over the Central Bank’s benchmark refinancing rate, now at 11 percent.

Putin also ordered Sberbank not to close branches. “A significant part of the [branch] network is not profitable, but you cannot abandon it. This is your payment for the state support,” he said.