OREANDA-NEWS. October 01, 2009. According to CBR, Russian banking assets increased 1.8% MoM in August after a virtually stagnant July. While corporate lending has been flat MoM, retail again lost 0.6%. On the funding side, the inflow came mostly from corporate accounts and through a sharp increase in accounts payable. Overdue loans increased from 5.47% to 5.85%. Despite a 0.5% MoM capital decrease, capital adequacy remained at a high level (18.9%), reported the press-centre of OTKRITIE FC.

View: That banking capital is once again decreasing (by RUB21bn), due to the need to create provisions and to respective sector losses, is clearly bad news. Risk aversion is pushing banks away from lending: customer loans decreased in the structure of banking assets from 59.2% a month ago to 58.1% (65% was the pre-crisis level).

Instead, banks increased their position in securities from 11.4% to 12% of assets in August. In the interbank market the shift was from 10.1% to 10.6%. We believe these will support returns, as compared with their previously high cash positions. Growth in overdue loans returned to the same 0.4ppts/month pace it held in May-June, which we believe is a positive sign. Banks are still capable of covering overdue loans at 1.6x with provisions, and considering the high capital adequacy, we believe this is a solid good indicator of sustainability.