OREANDA-NEWS. December 07, 2009. CBR released October banking statistics, indicating a 0.6 % MoM decline to RUB28.0tr. After a break in September, credit quality began again to deteriorate in October with overdue loans increasing to 6.1% (up from 5.8% a month ago), reported the press-centre of OTKRITIE FC.

In the absence of portfolio growth, banks continued to reduce CBR funding, which dropped RUB284bn, or 18% MoM. Retail deposits rose 1.4% MoM to RUB6.8tr, while corporate funding showed a substantial decline to RUB9.1tr (-2.2% MoM).

View: We believe the situation in the banking sector is more stable now, and attribute most of the asset decline to currency revaluation. Eliminating the currency effect suggests there was a small increase in corporate lending, whereas retail continued to fall (about -0.3% MoM).

We expected the growth in overdue loans, but given slower pace, they exert less pressure on banks’ earnings: provisioning charges in September-October were virtually half of their summer levels. We believe that it will not be banks that pull the economy out of recession, but rather that credit will start expanding only after risks are minimized. Thus, from our standpoint, the decline in corporate funding is a negative sign, hinting that fiscal stimulus is filtering poorly down to corporate accounts. In sum, we see the CBR monthly figures as neutral and reiterate the need to cherry-pick banking stocks.