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 March 2016, as well as changes during February 2016 and since 1 January 2016

- Charts illustrating balance sheet changes in 2M16 for the main state-related, privately-owned, foreign-owned and retail banks

Fitch notes the following key developments in February 2016:

Sector corporate loans nominally decreased by RUB175bn (-0.5%), and the exchange rate impact was minimal due to the fairly stable rouble/dollar exchange rate during the month. A significant drop in corporate lending was reported by Sberbank (-RUB191bn, -1.5%), Unicredit (-RUB30bn, -3.8%) and Rosbank (RUB34bn, -10.8%), while notable increases were seen in VTB (RUB27bn, 0.5%), Gazprombank (RUB55bn, 1.6%) and Credit Bank of Moscow (RUB49bn, 6%).

Retail lending was stable, which was a result of modest growth in major state banks and continued moderate 1%-3% deleveraging in most specialised consumer finance banks, except Tinkoff, which reported close to zero growth.

Customer funding (excluding that from government entities) increased RUB245bn in nominal terms (0.5%), or RUB268bn (0.5%) when adjusted for FX effect. The latter figure comprised RUB24bn (0.1%) inflow of corporate deposits and RUB244bn (1.1%) of retail funding. The biggest increases of corporate funding were in VTB (RUB294bn, 6.7%), Rusag (RUB72bn, 6%) and Alfa (RUB33bn, 4%), while notable decreases were in Sberbank (-RUB168bn, -2%), Citibank (-RUB83bn, -27%, offsetting a large RUB80bn inflow in January) and FC Otkritie (-RUB105bn, -15%). Retail funding grew evenly across the sector, with higher growth in Gazprombank (RUB20bn, 3%), Rusag (RUB17bn, 3%) and Sovcombank (RUB17bn, 11%).

State funding decreased further by RUB386bn (-6.4%), after repayments of RUB430bn (RUB360bn in roubles and RUB70bn in FX) to the Central Bank of Russia (CBR), RUB22bn to regional and federal budgets and RUB23bn to other government funds, which were partially offset by additional deposits of RUB90bn from the Finance Ministry. The largest repayments to the CBR were made by Sberbank (RUB97bn), VTB (RUB108bn) and its subsidiary Bank of Moscow (RUB48bn), Rusag (RUB88bn), Sovcombank (RUB68bn) and Promsvyazbank (RUB46bn). If this pace is maintained the sector may repay the remaining CBR rouble repo funding by 3Q16 and start accumulating significant surplus rouble liquidity. We believe the CBR is concerned about the potential impact on inflation if banks use this liquidity too quickly to issue new loans, and is therefore considering various options, including issuance of bonds to the banks, to sterilise the excess roubles.

Outstanding CBR FX funding was USD19bn (out of a USD50bn limit), utilised mainly by Otkritie (USD14bn), which borrowed about an additional USD850m in February.

The sector reported RUB18bn net profit in February (2.9% annualised ROAE). Sberbank reported a solid RUB31bn net income (16% annualised ROAE) and also recognised a RUB21bn positive revaluation of AFS securities directly to equity. Gazprombank recorded a net profit of RUB8bn (24% annualised ROAE), partially due to securities gains and release of loan impairment reserves.

Considerable losses were reported by Bank of Moscow (RUB6bn, -4.3% of end-January equity), Alfa (RUB4bn, -1.8%), B&N group banks (RUB8.5bn, largely due to a RUB9.1bn loss in ROST-Bank, whose equity was already negative), DeltaCredit (RUB1.7bn, -15%, mainly due to one-off losses related to refinancing of FX-denominated mortgage portfolio in February and corresponding creation of provisions). Among specialised retail banks, only Tinkoff reported sound net profit of RUB1bn (60% annualised ROAE), Orient Express and Home Credit broke even, while others (Russian Standard, OTP and RenCredit) lost 3%-4% of end-January equity.

The average capital ratios of the sampled banks marginally increased in February due to modest deleveraging and some profits. The core tier 1 ratio (N1.1) increased 11bps to 9.4% (minimum 4.5%), tier 1 (N1.2) 9bps to 9.9% (minimum 6%) and total capital ratio (N1.0) 4bps to 14.7% (minimum 8%) at the end of the month. These ratios are somewhat higher than those reported for the sector by CBR, mainly because they are calculated based on a simple, rather than weighted average; however, the direction of the ratios provides useful information about capital trends prior to the CBR publication of sector metrics.

We estimate that current capital buffers (excluding potential profits) of 48 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 13 could absorb less than 1%. The latter are VTB24, Leto Bank, Globex, RosCap, Pervobank, MDM, IBA-Moscow, Rencredit, JUGRA, UBRIR, Novikom, Moscow Industrial and Rosinterbank.

Although not a risk from a solvency perspective, Sberbank's Tier 1 ratio of 7.2% at end-February was only marginally above the minimum 6.775% requirement, including the capital buffers applied from January 2016. Under local GAAP the Tier 1 capital base at end-February did not include Sberbank's unaudited 2015 profit; the Tier 1 ratio would have been 70 bps higher if unaudited 2015 profit was included. We estimate Tier 1 capital has enough headroom for a planned dividend pay-out of 20% of IFRS net income. The bank is currently negotiating the conversion of a RUB500bn subordinated loan from the CBR into additional Tier 1 capital, which would increase the Tier 1 ratio by about 2ppts if executed.