Fitch Publishes 5M16 Russian Banks Datawatch
OREANDA-NEWS. Fitch Ratings has published the latest edition of the 'Russian Banks Datawatch', a monthly publication of spreadsheets with key data from Russian banks' statutory accounts.
The issue (available at www. fitchratings. com or by clicking the link above) includes:
- Balance sheet numbers as of 1 June 2016, as well as changes during May 2016 and since 1 January 2016
- Charts illustrating balance sheet changes in 5M16 for the main state-related, privately owned, foreign-owned and retail banks
Fitch notes the following key developments in May 2016:
There was a major reorganisation within VTB group, as the healthier part of BM-Bank (previously Bank of Moscow) was merged with VTB, while BM-Bank retained mainly legacy problem assets. This resulted in VTB on a standalone basis reporting significant increases in loans and deposits, while BM-Bank showed the opposite. Changes in the group's combined figures were more moderate and representative of real changes.
Sector corporate loans nominally grew by RUB0.4trn (1%), but were almost unchanged if adjusted for 3% rouble depreciation against the US dollar. VTB group accounted for RUB167bn of this growth, mainly due to the parent bank issuing long-term foreign-currency loans to non-residents (the nature of this is unclear as there were no major publicly announced loans by VTB during the month).
High growth was also reported by Bank Avers (RUB11bn, a 36% increase due to one large cash covered exposure) and Moscow Industrial Bank (RUB10bn, 6%). The rest of the sector deleveraged, with the largest decreases reported by Sberbank (RUB64bn, -0.5%), Alfa (RUB38bn, -3%), B&N (RUB17bn, -12%), Credit Bank of Moscow (RUB17bn, -2%) and Citibank (RUB18bn, -14%).
Retail loans grew by RUB18bn (0.2%), comprising RUB45bn (0.7%) growth in state banks and a RUB27bn (-0.7%) contraction in others. Among specialised retail banks, only Tinkoff grew (by almost 2%), while Orient Express deleveraged by 4%, Recredit was stable and others (Russian Standard, Home Credit and OTP) deleveraged by 1%-2%.
Customer funding (excluding that from government entities) nominally increased by RUB0.6trn (1.2%), but only by RUB58bn (0.1%) if adjusted for exchange rate effects. The latter figure comprised a RUB143bn (0.6%) inflow of retail deposits and an RUB85bn (-0.3%) outflow of corporate accounts. The latter contracted most at Sberbank (RUB239bn, -3%), VTB group (RUB78bn, -1%), Alfa (RUB59bn, -7%) and Rosbank (RUB26bn, - 9%). At the same time, considerable inflows were shown by Gazprombank (RUB136bn, 5%), Rusag (RUB41bn, 4%), Sviaz-bank (RUB25bn, 15%), AB Rossiya (RUB25bn, 6%), Raiffeisen (RUB22bn, 11%) and Citibank (RUB28bn, 14%). Retail deposit inflows were even across the sector.
State funding increased by RUB69bn nominally (1.4%), or by RUB41bn (0.9%) adjusting for exchange rate moves. The latter figure mainly comprised RUB167bn and RUB40bn of new borrowing from the Finance Ministry (Minfin) and regional/federal budgets respectively, offset by RUB163bn of repayments to the CBR. VTB group was the largest borrower from the state in May, utilising an additional RUB97bn from the CBR and RUB77bn from Minfin (broadly equal to the increase in foreign-currency loans).
Unicredit also raised RUB66bn from Minfin, while Sovcombank borrowed an additional RUB19bn from the CBR. Most other banks continued their repayment of CBR funds. This reflects the inflow of liquidity due to rouble emission by the CBR (RUB0.4trn in May) related to government spending of reserve funds to finance the budget deficit. The CBR is concerned about banks accumulating excessive liquidity and has therefore already made three increases in reserve requirements (one effective from March, the second from July and the third from August), which could result in RUB0.6trn-0.8trn of extra reserves placed by banks. It is also considering sterilisation options such as the issuance of bonds to banks.
CBR FX funding of banks decreased by USD1.3bn to USD14.5bn in May, mainly due to a USD0.8bn repayment by Otkritie (USD13.5bn remaining balance utilised mainly to buy Russian Eurobonds due in 2030) and USD0.4bn by Russian Standard (USD0.2bn outstanding balance).
The sector reported a RUB50bn net profit in May (8% annualised ROAE), of which Sberbank contributed RUB42bn (20% ROAE). Large losses were reported by Novikombank (RUB2.6bn, or 13% of end-April equity, partially consuming RUB5.2bn of financial aid received from shareholder Rostec in April) and by International Financial Club (RUB2.6bn, 78%, fully offset by RUB3bn of financial aid from its shareholder). Big losses were also reported by the failed Rost (RUB5.8bn) and Trust (RUB3.3bn), whose equity was already negative. Among retail banks, Russian Standard, OTP and Home Credit reported net profits ranging from 0.5% to 2.5% of end-April equity and Tinkoff was breakeven, while Orient Express and Rencredit lost about 4% of equity.
The sampled banks' average total capital ratios remained almost unchanged, as a 1% increase in risk-weighted assets (driven by the US dollar appreciation against the rouble) was offset by a similar increase in equity due to monthly profits. The core tier 1 (N1.1) and tier 1 (N1.2) ratios were 8.4% and 8.6% respectively (required minimums of 4.5% and 6%), and the total capital ratio (N1.0) was 12.5% (minimum 8%).
We estimate that current capital buffers (excluding potential future profits) of 40 of the sampled banks (excluding already failed and rescued banks, and those not reporting capital ratios) are sufficient to absorb potential loan losses equal to less than 5% of loans, and five could absorb less than 1%. The latter are VTB24, Promsvyazbank, Orient Express, UBRIR and Moscow Industrial Bank. We also see risks in some banking groups operating with very low or even negative equity on an aggregated basis (B&N Bank and SMP Bank groups), mainly due to them having rescued failed banks, which has eroded their capital bases.
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