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Fitch Publishes 1M17 Russian Banks Datawatch
March 3, 2017 / 2:07 PM / 9 months ago

Fitch Publishes 1M17 Russian Banks Datawatch

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Russian Banks Datawatch 1M17 - xls here MOSCOW/LONDON, March 03 (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 February 2017, and changes during 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 January 2017: Sector corporate loans nominally contracted by RUB243 billion (0.7%), but after adjusting for 1% rouble appreciation against the dollar the decrease was a smaller RUB145 billion (0.4%). Notable currency-adjusted decreases were reported by Sberbank (RUB93 billion, 0.8%), Alfa (RUB53 billion, 4.1%) and Credit Bank of Moscow (RUB39 billion, 3.9%), while there were considerable increases at Gazprombank (RUB30 billion, 0.9%), Raiffeisen (RUB26 billion, 8.1%) and Orient Express (RUB34 billion, 4.5x end-2016 corporate loans, due to merger with Uniastrum bank). Retail loans contracted by a moderate RUB19 billion (0.2%) after being adjusted for exchange-rate movements. The largest decrease was at Nordea (RUB16 billion, due to the sale of the mortgage portfolio to Sovcombank) while the largest increase was at Orient Express (RUB15 billion, 12.3%, due to the merger with Uniastrum). Only Tinkoff among the specialised retail banks increased loans, by 3%, while Russian Standard, Home Credit, OTP and Rencredit deleveraged by 0.4%-1%. Customer accounts (excluding those from government entities) nominally increased by RUB545 billion (1.1%), and by RUB677 billion (1.4%) after adjusting for currency movements, resulting from a RUB743 billion (3%) rise in corporate accounts and a RUB66 billion (0.3%) contraction in retail deposits. Large corporate account increases occurred at VTB (RUB435 billion, 10%, mainly due to growth of FX deposits with a maturity of more than three years from local corporates) and Rosneft-controlled VBRR (RUB203 billion, 140%, due to growth of FX current accounts).This significant inflow of foreign-currency funding correlates with the Central Bank of Russia's (CBR) FX reserves increase of about USD13 billion in January and therefore could be cross-border. Considerable increases in corporate accounts were also reported by Otkritie (RUB70 billion, 8.9%), Alfa (RUB32 billion, 3.8%) and Surgutneftegazbank (RUB34 billion, 42%). Retail deposits were more or less stable, while Orient Express' large RUB55bn increase (59%) was due to the merger with Uniastrum. State funding decreased (adjusting for currency movements) by RUB347 billion (9.8%). This was a net result of repayments of RUB771 billion to the CBR and RUB29 billion to other government entities, and borrowings of RUB427 billion from regional and federal budgets and RUB26 billion from the Ministry of Finance (MinFin). The largest repayments to the CBR were made by VTB (RUB414 billion) and Gazprombank (RUB65 billion), which were also the largest borrowers from regional and federal budgets, taking RUB183 billion and RUB82 billion, respectively. Considerable repayments of CBR funds were also reported by Otkritie (RUB101 billion), Credit Bank of Moscow (RUB43 billion), Express-Volga (RUB42 billion) and SMP bank (RUB44 billion). Remaining state funding was RUB2.3 trillion (excluding RUB0.4 trillion of CBR FX repo and the CBR's RUB0.5 trillion loan to Sberbank), of which the main users were VTB group (50% of total sector state funding; 10% of group liabilities), Gazprombank (16%; 8%) and Rusag (9%; 8%). We expect a further reduction of state funding in 2017 due to continued liquidity inflows driven by the CBR rouble issue. This issue is mainly related to the purchase of foreign currency from MinFin reserve funds of about RUB2.8 trillion in 2017 used to finance the budget deficit. MinFin plans to increase net borrowings to RUB1 trillion, so the remaining RUB1.8 trillion of deficit financing (RUB2.1 trillion in 2016) should be met mainly by selling reserves to the CBR. The continued rouble issuance is leading to a build-up of excess liquidity in the sector. The CBR has been sterilising this through deposit auctions, and in January conducted four one-week auctions for RUB500 billion-800 billion each. The outstanding amount of such placements with the CBR at end-January was a significant RUB935 billion (1.3% of banks' assets). We believe some of this money will be used by banks to buy government bonds as their issuance increases, although the liquidity surplus will not disappear as MinFin places temporary free funds with the banks or budgetary spending feeds into customer deposits. The sector reported RUB120 billion net profit in January (annualised ROAE of 17%), but adjusting for RUB83 billion of negative adjustments to last year's earnings recognised in equity, profit was a weaker RUB37 billion (5%). B&N Bank reported a large adjusted loss (RUB4.6 billion, 6% of end-2016 equity). Among the specialised retail banks, Tinkoff reported sound adjusted profit (5% of end-2016 equity). Russian Standard, Home Credit and Rencredit had more moderate but positive results of 1%-2%, while OTP lost 2.5%. The sampled banks' average capital ratios were roughly stable in January due to an absence of lending growth, limited currency movements and stable capital bases. 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%). In January the CBR increased the capital conservation buffer to 1.25% and systemic importance buffer to 0.35% from 0.625% and 0.15%, respectively, in 2016. Therefore systemically important banks now need to achieve 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 need to reach 5.75%, 7.25% 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% at end-January. 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 new capital from Gazprom. Eight of the non-systemically important sample banks (excluding failed and rescued banks and those not reporting capital ratios) breached the regulatory buffers, but not the minimum capital requirements. These are Globex, Orient Express, Rencredit, UBRIR, Moscow Industrial, International Financial Club, Uraltransbank and Jugra. Such violations lead to limitations on dividend payments, but are not grounds for licence withdrawals. However, Fitch believes that in some cases the CBR could discuss potential measures to strengthen capital with bank owners. We estimate that at end-1M17 the capital buffers (excluding potential future profits) of 28 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 two could absorb less than 1%. The latter are SKS-Bank (subsidiary of Credit Bank of Moscow) and UBRIR. The latest Datawatch is available at 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 9982 Alexander Danilov Senior Director +7 495 956 2408 James Watson Managing Director +7 495 956 6657 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email:; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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