Sberbank CIB, an arm of Russia's largest lender, plans to more than double its gold sales to India this year and sell more gold than forecast to China, while keeping gold purchases in Russia flat, its head of global markets said.
Purchases for sales to countries such as China and India go through the bank's Swiss branch, while most of Sberbank CIB's gold purchases from Russian gold miners stay within the country.
So far this year, trade with China is more active than the bank originally expected, Andrey Shemetov said. He did not detail why but last year China, the world's top gold consumer, curbed gold imports in a move to limit yuan outflows.
The bank plans to upgrade an initial forecast for gold sales to China of 20 tonnes in 2018 as it had already sold 14 tonnes of gold to Beijing in the first quarter alone. In 2017, its supplies to China totalled 5 tonnes of gold.
The bank also plans to supply 25-30 tonnes of gold to India in 2018. Sberbank sold 10 tonnes of gold to India, the world's second-biggest consumer after China, last year.
At home, Sberbank will keep its 2018 gold purchases flat at 100 tonnes, including 64 tonnes bought from local gold miners. The Russian central bank is the largest buyer of Russian gold, which it purchases for its gold and forex reserves from the local banks mainly in the over-the-counter (OTC) market.
The central bank has also started to trade gold on the Moscow Exchange but in tiny volumes as it aims to boost the gold market's liquidity domestically. The development of gold trading at home mirrors the idea of detaching pricing for Russia's flagship Urals oil from the global benchmark, Brent, as Moscow wants more flexibility and a better price.
Sberbank CIB wants to increase its purchases from the OTC market and hopes trade between banks will develop alongside the central bank's activity, Shemetov told Reuters. Sberbank CIB also welcomed the central bank's efforts to boost the volumes of gold traded on the Moscow Exchange.
"It is important that the central bank is supporting the Moscow Exchange ... we, as a transparent company, are advocating for an open market," Shemetov said. "I believe that the central bank itself wants an open market trade which may boost liquidity." Trade in Urals oil lacks the volumes to be detached from Brent pricing. If gold pricing in Russia were developed it would help increase pricing flexibility and soften volatility.
Turning to other commodities, Shemetov said Sberbank CIB was interested in building up its grain business in Russia, one of the world's largest grain exporters. The bank is actively developing its instruments for short-term prepayment of future grain supplies from farmers - an area where it competes with VTB Capital, the investment banking unit of Russia's No.2 bank VTB.
Farmers in Russia have fewer funds for sowing this year and this could affect crop yields, Russia's Grain Union, a non-governmental farm lobby, has said.
The agriculture ministry has said that demand from farmers for short-term loans is up this year due to a new state mechanism that made such loans more attractive.
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