Russia's banks may need $40 bln extra capital--Moody's

MOSCOW, June 1 (Reuters) - Russian banks may need around 1.3 trillion roubles ($41.51 billion) for recapitalisation in 2009, Moody's said on Monday, predicting capital erosion would be the major trigger for rating downgrades.

The Russian central bank has said previously the banks may need 500 billion roubles in extra capital if non-performing loans rise to 10-12 percent from 4 percent as of the end of April. [ID:nLK352548]

"Moody's ... expects capital erosion to be the major trigger for rating downgrades in 2009. The outlook on the Russian banking system is negative," Moody's said in a report entitled "Russian banks: Major challenges amid the economic downturn".

By the end of 2009, Moody's expects NPLs to increase to 20 percent from 11.0 percent of total loans at the beginning of the second quarter. It calculated that an additional 10-15 percent of loans have been restructured to avoid payment default.

The central bank has estimated Russian banks have restructured 20 percent of their bad loans. [ID:nLR937506]

Standard and Poor's earlier said problem loans could soar to 35-50 percent of total lending in Russia, Ukraine and Kazakhstan, though actual loan losses will not be more than half that level in Russia [ID:nLJ957879].

"Russian banks are likely to face challenges in obtaining new capital from shareholders as they also face difficulties in the current operating environment. Thus, the Russian banking sector is currently strongly dependent on government support," Moody's said.

The agency believes that the Russian banking sector might experience further consolidation in the form of mergers and acquisitions as a result of the weakening credit fundamentals of banks not directly benefiting from government support. (Reporting by Dmitry Sergeyev; Editing by Ruth Pitchford)