Russian bank assets up at fastest pace in 10 mths

MOSCOW Dec 30 (Reuters) - Russian banks' assets rose at their fastest rate in 10 months in November and lending to companies picked up, data showed on Wednesday, in a further sign that the sector is slowly recovering from the financial crisis. Banking assets rose 2.5 percent in November and their capital increased for the third consecutive month, albeit at a slower rate than in October, according to central bank data.

In return, banks stepped up lending to non-financial companies by 0.3 percent -- after six consecutive months of loan portfolios sliding down.

That should provide some cheer to the central bank and other officials, who have called on the sector to lend more to the real economy to help it out of recession. [ID:nLDE5BR0PR]

However, banks' retail loan portfolios shrank for a 10th month in a row, possibly in part due to consumers' unwillingness to borrow while unemployment remains high.

Reflecting banks' ongoing risks, non-performing loans (NPLs) picked up slightly on the month to stand at 5.2 percent of the total loan portfolio as of Dec. 1.

The central bank regards an NPL ratio of 10 percent as a key line in the sand for the banking system.

However the monthly pace of bad loan growth eased to around 3.9 percent from 4.4 percent in the previous period. Russia's biggest lenders Sberbank SBER03.MM and VTB (VTBR.MM) expect bad loans to peak in the first half of 2010.

People's confidence in banks, meanwhile, continued to recover, following a shaky period in autumn 2008 at the height of the crisis and controlled rouble devaluation.

Retail deposits rose to their highest level this year, and the rouble's share increased, reflecting greater faith in the national currency. (Writing by Toni Vorobyova; Editing by Dmitry Sergeyev and David Cowell)