Russia’s Sberbank says stuck with Rusal debt for now

By Darya Korsunskaya

MOSCOW (Reuters) – The head of Russia’s biggest lender Sberbank said on Tuesday it had no immediate option to get rid of the $4 billion in Rusal debt on its books, even though the aluminum firm’s inclusion on a U.S. sanctions blacklist created risks for its creditors.

The value of Rusal’s stocks and bonds has plummeted since the firm, and its controlling shareholder Oleg Deripaska, were hit with sanctions. They bar U.S. investors from doing business with Rusal, and threaten retribution too for companies outside the United States that help it.

German Gref, chief executive of state-owned Sberbank <SBER.MM>, said his bank was not at risk from Rusal defaulting on the debt because the bulk of Rusal’s 27.8 percent stake in Nornickel, one of the world’s biggest nickel producers, was pledged as collateral on the debt.

But the relationship with Rusal potentially exposes Sberbank itself to sanctions risk.

Asked by reporters if he was worried Sberbank could be included on the U.S. sanctions list because of its association with Rusal, Gref said: “But what should I do?”

“Rusal is our client with enormous loans extended by us. We’re a bank, after all, we’re not selling sweets, where you can stop selling a particular type of sweet. What can we do in this situation?”

Gref said there had so far been no discussion about Sberbank transferring the Rusal debt to someone else. “Tell me to whom?” he said, when asked about that possibility.

He said Promsvyazbank, a lender earmarked by the government to provide credit to sanctioned entities so that other lenders can offload the risk, was not yet up and running.

“We’re assessing the whole situation. That takes time. Depending on that, we will come up with some considered solutions. For now, it’s physically not possible to undertake any actions. There are only one or two banks in the country that could take on such big clients.”

Sberbank is Russia’s biggest bank by assets, and the second biggest is VTB, which is also state-controlled. VTB is also a major creditor of Rusal.

Gref said there was no issue at the moment with Rusal servicing its debt, and that the aluminum producer had not come to Sberbank seeking help.

Under U.S. sanctions legislation, firms outside U.S. jurisdiction can be put on a sanctions blacklist if they are deemed to be helping an entity dodge sanctions, or are doing significant transactions with that entity.

Gref said he did not think it likely, for now, that the bank would be targeted by U.S. sanctions.

“The inclusion of Sberbank on the SDN (sanctions) list is not in the realm of likelihood in my understanding,” Gref told reporters.

(Writing by Maria Kiselyova and Christian Lowe; Editing by Mark Potter)