UPDATE 2-Russia's VEB to issue $2 bln Eurobond in May -source

* Plans to issue at least two tranches worth $1 bln each

* Previously planned just one $1 bln tranche in April

* Mulls Eurobond issue for foreign markets

(Adds VEB’s plans abroad)

By Yelena Fabrichnaya

MOSCOW, April 13 (Reuters) - Russian state bank VEB will delay a Eurobond issue aimed at local banks seeking instruments to park their foreign currency reserves accumulated during the rouble devaluation, a VEB source said on Monday.

The source said VEB will delay the issue of a first $1 billion tranche of foreign currency bonds to May from April for technical reasons, but had doubled the amount it plans to raise to at least $2 billion.

Previously it had planned just one $1 billion tranche in April.

“The placement will most likely take place in May, because the issue papers have not yet been registered with the financial services watchdog,” the source said.

Russian banks accumulated large foreign currency reserves during a slow-burn devaluation of the rouble when the national currency lost around 30 percent of its value against dollar.

VEB’s head Vladimir Dmitriyev estimated in February the volume of free dollar liquidity in Russian banks exceeded $20 billion.

The appreciation of foreign currency assets allowed the banks to show profits despite their rising share of bad loans, but an end of rouble depreciation expectations has reduced speculative interest in foreign currency trading.

VEB is also considering the issuance of a Eurobond with a maturity of up to five years for foreign markets, another source in VEB said.

“The funds will go to refinancing of long-term loans,” he said.

VEB bank earlier said it plans to issue foreign currency bonds worth at least $5 billion at a yield of LIBOR LIBOR plus 1 percent for the domestic market.

“The demand is quite good, we will be able to place several tranches, at least for $2 billion (in total),” the source said.

VEB's Eurobond issue would be placed via closed subscription to Russian banks and the country's biggest lender Sberbank SBER03.MM has said it is ready to buy at least $500 million of bonds. [ID:nLR945233]

Russia's gas export monopoly Gazprom GAZP.MM plans to issue at least $2 billion in Eurobonds this week and this could be the reason for VEB to postpone its Eurobond issuance, according to a treasurer a top-30 Russian bank, but a source at VEB said the postponement was not linked to Gazprom's plans. (Additional reporting by Oksana Kobzeva; Writing by Dmitry Sergeyev; Editing by David Holmes)