International banks led by BNP Paribas SA are lending the most in Russia since 2008, turning to companies in the world’s biggest energy exporting economy for higher returns as loan rates tumble in Europe.

Russian companies borrowed $10.1 billion this month, taking the total this year to $39.6 billion, more than twice the amount in 2009, according to data compiled by Bloomberg. OAO Sberbank borrowed $2 billion last week in the largest syndicated loan for a Russian bank, paying annual interest at 150 basis points, or 1.5 percentage point, over the London interbank offered rate for three years. The rate compares with margins of at least 250 basis points for three-year loans provided to state-owned lenders Vnesheconombank and OAO Gazprombank this year.

Banks outside of Russia are looking east as improved corporate profits drives loan rates in western Europe to as little as 12.5 basis points over benchmark interbank rates for Nestle SA, the Vevey, Switzerland-based food manufacturer. Lenders are stepping up credit to Russia as a 21 percent gain in oil prices in the past four months boosts confidence in the economy’s recovery.

“The market is wide open for top quality Russian names,” said Mark Waters, the London-based head of loan syndication to energy and commodity companies at BNP Paribas. The Paris-based bank overtook Credit Agricole CIB as the biggest lender to Russia and the former Soviet Union this year, data compiled by Bloomberg show. “We’re still seeing pricing levels that are attractive to lenders” in Russia, he said.

Syndicated loans to Russian companies climbed 140 percent from $16.7 billion last year. The market exceeded the equivalent of $28 billion raised from domestic bonds, a turnaround from last year when local debt was the bigger market.

Reduced Interest

“Issuers are adding loans to balance and optimize investor demand,” Herbert Moos, deputy chairman of VTB Group, Russia’s second-biggest lender, said by e-mail.

Banks competing to lend in Russia have reduced the average interest margin by 19 percent to 350 basis points from 432 last year, data compiled by Bloomberg show. The decline in western Europe has been steeper at 37 percent, taking the average for loans to investment-grade borrowers to 109.3 basis points, the lowest since 2007, the data show.

Gains in Russian government dollar bonds due in 2020 pushed the yield 7 basis points lower to 5.086 percent on Dec. 17. The country’s ruble notes due August 2016 were little changed, leaving the yield at 7.58 percent.

Extra Yield

The extra yield that investors demand over U.S. Treasuries to hold Russian debt, rated Baa1 by Moody’s Investors Service, rose 8 basis points to 209, according to JPMorgan Chase & Co.’s EMBI+ Indexes. The difference compares with 147 for debt of similarly rated Mexico and 188 for Brazil, which is rated two steps lower at Baa3 by Moody’s.

The yield spread on Russian bonds is 43 basis points below the average for emerging markets, near the smallest difference since September 2009 and down from a 15-month high of 105 in February, according to JPMorgan Indexes.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps was little changed at 142, down from this year’s peak of 217, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Credit-default swaps for Russia cost 10 basis points more than contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.

Deal ‘Pipeline’

The ruble climbed less than 0.1 percent to 30.6890 per dollar, bringing its weekly increase to 0.8 percent. Non- deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, show the ruble at 31.0600 per dollar in three months.

Borrowing costs in Russia are still higher than two years ago, when Sberbank, the country’s biggest lender, got a three- year loan paying interest 85 basis points above Libor, data compiled by Bloomberg show. Libor was WHAT on DEC 17

“There is good space for Russian top companies and banks to lower their borrowing costs, as banks return more heavily to emerging-market lending,” said Luis Costa, an emerging market credit strategist at Citigroup Inc. in London. “Russian borrowers are back in the pipeline even more than Latin American and Asian companies.”

Sberbank may borrow from the syndicated loan market again next year, as well as issue Eurobonds “depending on market conditions,” Deputy Chief Executive Officer Bella Zlatkis told reporters in Moscow on Dec. 17. Sberbank’s loan was quoted at 98.75 percent of face value on Dec. 17, according to WestLB AG prices.

Rusal Restructuring

United Co. Rusal, the world’s biggest aluminum producer, plans to begin discussions with banks early next year for $5 billion of new borrowing, including loans to refinance existing debt, Deputy Chief Executive Officer Oleg Mukhamedshin said in an interview in London on Dec. 1. The Moscow-based company renegotiated $17 billion of loans to foreign and Russian lenders last year in the country’s biggest corporate restructuring.

Banks reduced the interest Rusal pays over Libor to 450 basis points in September, from 550 in June and 700 in December 2009. The company expects to cut borrowing costs further next year, Mukhamedshin said.

The increase in Russian borrowing contrasts with other emerging markets in Europe, the Middle East and Africa, where lending declined 43 percent this year to $282 billion, data compiled by Bloomberg.

Russia’s economy is recovering from a 7.9 percent contraction last year, the country’s worst slump since the Soviet Union collapsed two decades ago. The government expects 3.8 percent growth in 2010 and 4.2 percent next year, compared with official forecasts of about 1.4 percent growth in the Eurozone.

“We’ve seen a lot of banks move back into Russia,” said John Starling, a director for HSBC Holdings Plc’s loan syndicate in London.