November 30, 2016 / 9:46 AM / a year ago

Fitch Publishes 10M16 Russian Banks Datawatch

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Russian Banks Datawatch 10M16 - xls here MOSCOW, November 30 (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 November 2016, as well as changes during October 2016 and since 1 January 2016 - Charts illustrating balance sheet changes in 10M16 for the main state-related, privately owned, foreign-owned and retail banks Fitch notes the following key developments in October 2016: Sector corporate loans remained almost unchanged nominally, but grew modestly by RUB63bn (0.2%) after adjusting for a small (less than 1%) rouble depreciation against the US dollar. A bigger increase was reported by VTB (RUB153bn, 3%, entirely due to loans to non-residents), while notable decreases were seen in FC Otkritie (RUB74bn, 3%) and Credit Bank of Moscow (RUB66bn, 7%; mainly due to repayment of rouble reverse repo exposures). B&N bank's corporate book also contracted by a significant RUB20bn (19%), which, however, could be due to transfers within the group, as Rost-bank and MDM bank at the same time reported growth of corporate loans of, respectively, RUB10bn and RUB7bn. Retail loans grew a moderate RUB26bn (0.2%), driven by state banks, mainly in Sberbank (RUB15bn, 0.3%) and VTB's Post Bank (RUB5bn, 5%). Among specialised retail banks, Rencredit and OTP grew 1%-2%, Home Credit, Tinkoff and Orient Express were stable and Russian Standard deleveraged by 1%. The Central Bank of Russia (CBR) did not buy foreign currency from the Finance Ministry (MinFin) in September-October, so rouble issuance was limited in that period (previously in 8M16 about RUB1.2trn were issued). Therefore no new liquidity inflow in the banking sector occurred in October, when customer funding (excluding that from government entities) decreased RUB214bn (0.4%), but by a smaller RUB144bn (0.3%) after adjusting for currency moves. The latter figure was due to a RUB285bn (1.1%) outflow of corporate accounts, which was partially offset by a RUB141bn (0.6%) inflow of retail deposits. Some of the bigger corporate funding outflows were in Sberbank (RUB295bn, 4%), Gazprombank (RUB59bn, 2%), Sviaz-bank (RUB42bn, 26%, mainly due to the bank no longer being eligible for placements of pension fund deposits) and Credit Bank of Moscow (RUB82bn, 12%, probably connected with the above repayment of reverse repos), while notable inflows were reported by VTB (RUB96bn, 2%) Rusag (RUB67bn, 6%), Alfa-bank (RUB56bn, 8%) and Prosvyazbank (RUB41bn, 7%). Retail funding growth was fairly even across the sector. Adjusting for currency moves, state funding decreased by a small RUB13bn (0.3%). This was a net result of repayments of RUB185bn to CBR and RUB38bn to regional and federal budgets, and borrowings of RUB176bn from the Finance Ministry and RUB34bn from other government entities. The repayments to the CBR were made mainly by Otkrytie (RUB233bn, of which RUB156bn was in FX), while additional MinFin/budgetary funding was raised mainly by VTB Group (RUB137bn) and Gazprmonbank (RUB51bn). Remaining state funding was only RUB3.7trn (excluding RUB0.6trn of FX repo and CBR's RUB500bn subordinated loan to Sberbank), of which the main users were VTB group (54% of total; 17% of liabilities), Gazprombank (15%; 13%) 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 top 100 banks have repaid all state funding raised previously and some now have excess liquidity. To sterilise this, the CBR conducted five one-week and overnight deposits auctions in October for RUB90bn-RUB220bn each, while the outstanding amount of such placements at the end of month was RUB0.4trn (0.6% of banks' assets). The sector reported a decent RUB80bn net profit in October (12.4% annualised ROAE), while net of Sberbank's robust profit of RUB53bn (23%) the result was a more modest RUB27bn (6.5%). Good results were reported by VTB (RUB11bn; 10%) and VTB24 (RUB8bn; 47%; the source of these earnings is unclear but they could be at least partially related to loan sales/recoveries, which may be difficult to sustain). Solid profits were also shown by Sovcombank (RUB2bn; 58%) and subsidiary Express-Volga (RUB2.8bn), both largely due to tax accounting, Promsvyazbank (RUB2.9bn; 45%), Unicreditbank (RUB3.5bn; 27%) and Alfa-bank (RUB2.5bn; 14%). Large impairment-driven losses were reported by Jugra (RUB3.4bn; 15% of end-September equity) and by failed Mosoblbank and Trust (about RUB2bn each; both banks' equity was already negative). Among specialised retail banks, Home Credit and Tinkoff performed better with annualised ROAE of, respectively, 33% and 55%. Orient Express, Rencredit, OTP and Russian Standard were around break even. The sampled banks' capital ratios were stable in October, as modest lending growth was in line with internal capital generation. The average core Tier 1 (N1.1) and Tier 1 (N1.2) ratios were, respectively, 8.7% and 8.9% (required minimums of 4.5% and 6%) and the total capital ratio (N1.0) was 12.9% (minimum 10%). However, of 10 systemically important banks, three had only moderate headroom in the Tier 1 ratio (the main potential bottleneck) over the minimum level (6.675% including buffers; to be increased to 7.6% in 2017); these are GPB, Alfa-Bank (both at 7.9% at end-9M16) and PSB (6.8%). However, GPB may receive up to RUB85bn of new capital (which would boost the Tier 1 capital ratio by up to 170bp) from Gazprom based on the company's revised investment programme for 2016, and Alfa has placed a USD400m perpetual bond (equal to 110bp of risk-weighted assets) in early November. We estimate that at 1 November 2016 capital buffers (excluding potential future profits) of 36 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 three could absorb less than 1%. These three are VTB24, UBRIR and Moscow Industrial Bank. 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 99 82 Alexander Danilov Senior Director +7 495 956 24 08 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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