January 12, 2017 / 3:35 PM / a year ago

Fitch Publishes 11M16 Russian Banks Datawatch

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Russian Banks Datawatch 11M16 - Excel File here MOSCOW, January 12 (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 December 2016, as well as changes during November 2016 and since 1 January 2016 - Charts illustrating balance sheet changes in 11M16 for the main state-related, privately owned, foreign-owned and retail banks Fitch notes the following key developments in November 2016: Sector corporate loans nominally grew RUB320bn (0.9%), but after adjusting for 3% rouble depreciation against the US dollar marginally decreased RUB91bn (0.3%).Notable currency adjusted increases were reported by Sberbank (RUB112bn, 1%), VTB (RUB62bn, 1%) and Credit Bank of Moscow (RUB33bn, 4%, largely due to increase of FX reverse repo book), while considerable decreases were seen at FC Otkritie (RUB310bn, 15%, mainly due to repayment of FX reverse repo exposures) and Promsvyazbank (RUB43bn, 6%). Retail loans grew by a moderate RUB80bn (0.7%), after being adjusted for exchange rate moves. The growth was mainly in Sberbank (RUB21bn, 0.5%), VTB24 (RUB13bn, 0.8%) and FC Otkritie (RUB17bn, 11%). Among specialised retail banks Home Credit, Tinkoff and Rencredit grew 1%, Russian Standard and OTP were stable, while Orient Express deleveraged by 8%, probably due to bad loan sales/write-offs, as loan reserves decreased by roughly the same amount. Deposit growth slowed due to limited rouble issuance by the Central Bank of Russia (CBR), as it did not buy foreign currency from the Ministry of Finance in September-November (8M16: about RUB1.2trn were issued). Customer funding (excluding that from government entities) nominally increased by RUB912bn (2%), but after adjusting for currency movements, by a lower RUB359bn (0.7%), comprising growth of RUB157bn (0.6%) of corporate and RUB202bn (0.9%) of retail deposits. The largest FX-adjusted inflows of corporate funding occurred in VTB (RUB146bn, 3%), Gazprombank (RUB92bn, 4%) and Unicredit (RUB30bn, 5%), while big outflows were reported by VBRR (RUB84bn, 36%), FC Otkritie (RUB39bn, 5%), Promsvyaz (RUB31bn, 5%) and Russian Standard (RUB28bn, 26%, largely due to repayment of short-term funding to non-residents). Retail funding growth was broadly even across the sector. Absent of loan growth, deposit inflows were mainly used to further repay state funding, which, adjusting for currency moves, decreased RUB226bn (5%). This was a net result of repayments of RUB512bn to the Ministry of Finance and borrowings of RUB255bn from CBR, RUB23bn from regional and federal budgets and RUB8bn from other government funds. The repayments to Minfin were made mainly by VTB group (RUB394bn) which at the same time borrowed RUB284bn from CBR, and by FC Otkritie (RUB106bn). Remaining state funding was RUB3.5trn (excluding RUB0.5trn of FX repo and CBR's RUB500bn subordinated loan to Sberbank), of which the main users were VTB group (54% of total sector state funding; 16% of group's total liabilities), Gazprombank (16%; 12%) and Russian Agricultural Bank (6%; 10%). These banks' continued dependence on rather expensive state funding weighs on their funding costs. At the same time, the vast majority of the largest banks had already repaid expensive state funding and some of them now have excess liquidity. To sterilise this, CBR conducted seven one-week and overnight deposits auctions in November for RUB250bn-RUB700bn each, while the outstanding amount of such bank placements with CBR at the end of the month was RUB0.5trn (0.7% of banks' assets). The sector reported a healthy RUB90bn net profit in November (14% annualised ROAE), but Sberbank again contributed the bulk of it (RUB53bn, 23% annualised ROAE). Decent profits were also reported by VTB group (RUB20bn, 15%, partially could be due to bad loan sales/recoveries, as loan reserves decreased RUB13bn in November), Promsvyazbank (RUB8bn, 119%, could also be related to bad debt sales/recoveries as reserves decreased RUB7bn) and by B&N group (RUB8bn, the group's combined equity is negative, the nature of this gain is unclear). Considerable impairment-driven losses were shown by Jugra (RUB3bn, -15% of end-October equity, partially compensated by RUB0.7bn material aid from shareholders) and MTS-Bank (RUB3.6bn, 25%, fully compensated by RUB10.5bn of new equity from Sistema. Among specialised retail banks, Home Credit and Tinkoff performed better, with annualised ROAE of 30%-40%. OTP and Rencredit both reported healthy ROAE of around 15%, Orient Express was slightly above break-even (3%), while Russian Standard was still in the red (-7%). The sampled banks' Total Capital ratios (N1.0, 12.9% average at end-November, required minimum of 8%) were stable in November due to modest lending contraction and profits. Tier 1 (N1.2, 9.2% average, 6%) and Core Tier 1 (N1.1 8.9% average, 4.5%) ratios also improved 20bps-30bps as some banks audited interim profits and these are now included in capital, for example, Sberbank's Core Tier 1 capital increased RUB156bn (60bps) mostly because of this. CBR increased capital buffers in January 2017 and two out of 10 systemically important banks (SIBs) have only moderate headroom in the Tier 1 ratio (requirement including buffers of 7.6% from 2017); these are Gazprombank (7.9% at end-November, however, it may receive up to RUB85bn of new capital from Gazprom (equal to 170bps of risk weighted assets)) and Promsvyazbank (7%). We estimate that at 1 December 2016 capital buffers (excluding potential future profits) of 33 of the sampled banks (excluding already failed and rescued banks, and those not reporting capital ratios) were sufficient to absorb potential losses equal to less than 5% of loans, and two could absorb less than 1%. These two are 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 Additional information is available on www.fitchratings.com. Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com. 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