Russian Banks Improve Credit Quality and Increase Capital
OREANDA-NEWS. November 05, 2009. The assets of Russian banks declined 0.5% in September, with a continued decline in lending portfolios. Overdue loans decreased for the first time in the corporate sector, from 5.7% in August to 5.6% in September, but there was no such easing of the pace in retail, and total overdue loans were flat MoM at 5.8%. A positive note can be seen in the 6.5% MoM increase in banking sector capital, reported the press-centre of Otkritie FC.
View: The decline in lending is largely the effect of a revaluation of foreign currency denominated loans; when this factor is excluded, corporate portfolios were up ~0.5-0.7%, whereas retail is still down 0.5% MoM. Lending growth in the corporate sector remains fragile. Still, it signals that monetary weakening is filtering through and the demand for loans is improving. Improvements in corporate lending quality came largely as a result of the efforts of two banks, VTB and Alfa.
However, even without these two banks, the pace of growth in corporate overdue loans has slowed for the rest of the system. This allowed banks to decrease total provisioning charges from the ~RUB100bn/month level they had previously been posting to RUB56bn, which helped earn ~RUB19bn in profit for the sector. The total capital base has increased 6.5% MoM to RUB4,47tr, but most of this growth is due to revaluation of assets. Altogether, this set of statistics indicates stabilization in the banking sector, which is quite positive from macro perspective.
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