April 13, 2017 / 1:08 PM / 4 months ago

Fitch Publishes 2M17 Russian Banks Datawatch

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Russian Banks Datawatch 2M17 - xls here LONDON/MOSCOW, April 13 (Fitch) 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 publication includes: - Balance sheet numbers as of 1 March 2017, as well as changes during February 2017 and since 1 January 2017 - Charts illustrating balance-sheet changes in 2017 for the main state-related, privately owned, foreign-owned and retail banks Fitch notes the following key developments in the banking sector in February 2017: Corporate loans nominally contracted by RUB326 billion (0.9%), but after adjusting for 4% rouble appreciation against the dollar grew by RUB105 billion (0.3%). Growth was concentrated at National Clearing Centre (RUB76 billion, 16%; all corporate reverse repo exposure), Sberbank (RUB39 billion, 0.4%) and FC Otkritie (RUB27 billion, 1.6%). Considerable decreases occurred at VTB (RUB33 billion, -0.6%), VBRR (RUB20 billion, 29%) and Alfa-Bank (RUB15 billion, 1.3%). Retail loans grew by a moderate RUB30 billion (0.3%) after being adjusted for exchange rate movements. The growth was mainly in state banks (RUB27 billion), particularly in VTB group (RUB22 billion, 1.1%). Among the specialised retail banks only Tinkoff grew by 2%, while Russian Standard, Home Credit, OTP and Rencreit deleveraged by 0.2%-1.3%. Minfin did not sell FX reserves in January-February, so there was no rouble issuance by CBR and so customer funding inflow was moderate. Customer accounts (excluding those from government entities) nominally decreased by RUB311 billion (0.6%), but increased by RUB313 billion (0.6%) after adjusting for currency moves, consisting of RUB29 billion inflow (0.1%) of corporate accounts and RUB284 billion (1.2%) of retail deposits. Large corporate accounts outflows occurred at Sberbank (RUB180 billion, 3%), Alfa-Bank (RUB31 billion, 3.5%) and Promsvyaz (RUB22 billion, 3.8%). They, however, fell at Rosneft-controlled VBRR (RUB127 billion, 38%), but we do not consider this a concern given a RUB203 billion inflow in January. Considerable inflows of corporate funds were reported by VTB (RUB67 billion, 1.4%), Gazprombank (RUB49 billion, 1.7%), FC Otkritie (RUB78 billion, 9.2%) and Credit Bank of Moscow (RUB53 billion, 10%). Retail deposits grew evenly across the sector. State funding decreased by RUB120 billion (3.8%) adjusting for currency moves. This was a net result of repayments of RUB472 billion to the Central Bank of Russia (CBR) and RUB21 billion to regional and federal budgets and borrowings of RUB281 billion from the Ministry of Finance (Minfin) and RUB92 billion from other government entities. The largest repayments to CBR were made by VTB group (RUB445 billion), which was also the largest borrower from Minfin, taking RUB319 billion. Considerable repayment to CBR was also reported by FC Otkritie (RUB45 billion, mainly FX). Remaining state funding was RUB2.2 trillion (excluding RUB0.3 trillion of CBR FX repo and the CBR's RUB0.5 trillion subordinated loan to Sberbank), of which the main users were VTB group (47% of total state funding; 9% of group liabilities), Gazprombank (15%; 8%) and Rusag (9%; 8%). The structural liquidity surplus persists with the outstanding amount of bank auction placements with CBR at end-February being a significant RUB630 billion (1% of banks' assets). We believe some of this money temporarily parked in the CBR will be used by banks to buy government bonds, as the government plans to increase net borrowings to fund the budget deficit. However the liquidity surplus will not disappear as the MinFin places temporary free funds with the banks, while budgetary spending feeds into customer deposits. The sector reported moderate RUB56 billion net profit in January (annualised ROAE of 8%). Sberbank earned RUB47bn (19%), or 84% of sector profit. Considerable losses were reported by Alfa-bank (RUB8 billion, 4% of end-January equity; due to FX losses). Among the specialised retail banks, Tinkoff reported sound profit (6% of end-January equity). Russian Standard, Home Credit, Rencredit and OTP had more moderate but positive results of 1%-3%. Also the banks recognised RUB25 billion positive adjustments to last year's earnings in February accounted directly in equity. The largest positive adjustments were by Sberbank (RUB29 billion, 1% of equity) and Mosoblbank (RUB12 billion, equity is negative) which is under financial rehabilitation. Considerable negative adjustments were reported by Promsvyaz (RUB5 billion, 6%) and MTS-Bank (RUB1.5 billion, 8%). The sampled banks' average capital ratios were stable in February as moderate lending growth was compensated by profits and reduced volume of FX risk-weighted assets thanks to rouble appreciation. The average total capital ratio was 13.6% (required minimum, excluding buffers: 8%), the Tier 1 ratio 9.5% (6%) and the Core Tier 1 9.2% (4.5%). CBR increased the capital buffer requirements beginning 2017 and systemically important banks now need to comply with a core Tier 1 ratio of 6.1%, a Tier 1 ratio of 7.6% and a total ratio of 9.6%, while other banks requirements are 5.75%, 7.5% and 9.25%, respectively. All 10 systemically important banks complied with the capital ratios including the revised buffers, although two of them, Gazprombank and Promsvyazbank, have only moderate Tier 1 cushions, with ratios of 8% and 7.8% at end-February. Gazprombank should improve its Tier 1 ratio by about 200bp once its 2016 profit has been audited (this is currently treated as Tier 2 capital) and by a further 150bp-200bp when it receives RUB85 billion of new capital from Gazprom in 1H17. Eleven of the non-systemically important sample banks (excluding failed and rescued banks and those not reporting capital ratios) had capital ratios above the minimum capital requirements, but did not meet the regulatory buffers, although this does not represent a regulatory breach as compliance with buffers is required only at the end of each quarter. These are Globex, VTB24, Ak Bars, Metcombank, Rencredit, UBRIR, Moscow Industrial Bank, Orient Express, Asian Pacific, Uraltrasbank and International Financial Club. Inability to meet buffer requirements could lead to limitations on dividend payments, but would not represent grounds for a licence withdrawal. However, Fitch believes that in some cases the CBR could discuss potential measures to strengthen capital with bank owners. We estimate that at end-2M17 the capital buffers (excluding potential future profits) of 31 of the sampled banks (excluding failed and rescued banks, and those not reporting capital ratios) were sufficient to absorb potential losses equal to less than 5% of loans (based on minimal capital requirements) and three could absorb less than 1%. The latter are SKS-Bank (subsidiary of Credit Bank of Moscow), UBRIR and Moscow Industrial Bank. The latest Datawatch is available at www.fitchratings.com or by clicking the link above. Contact: Anton Lopatin Director +7 495 956 70 96 Fitch Ratings CIS Limited 26 Valovaya Street Moscow 115054 Ruslan Bulatov Associate Director +7 495 956 99 82 Alexander Danilov Senior Director +7 495 956 24 08 James Watson Managing Director +7 495 956 6657 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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