December 19, 2011 / 11:21 AM / 9 years ago

Russia's state banks seen too upbeat on 2012 growth

* State banks forecast loan growth of 20-25 pct

* Local credit demand up as foreign funding markets close

* But domestic liquidity tight, growth outlook worsening

By Katya Golubkova

MOSCOW, Dec 19 (Reuters) - Frozen global debt markets and slowing economic growth in Russia mean state-controlled banks in the world’s 11th largest economy might be too optimistic in their belief they can maintain strong growth next year.

Russia’s top lender Sberbank sees its loans growing by 25 percent in 2012 while its closest peer VTB is aiming for a 20 percent rise, at the top of the central bank’s forecast range of 15-20 percent lending growth.

“The problems on global financial markets are boosting credit demand in the Russian banking system — companies are switching to local banks as external markets are closed for many of them,” said Ekaterina Trofimova, first vice-president with country’s third biggest lender Gazprombank.

Overall corporate loans grew by 20.1 percent in the first 10 months of 2011, while retail loans rose by 26.7 percent, broadly in line with central bank’s forecast for the year of 20-25 percent, with foreign debt markets largely closed since summer.

“This tendency (local companies switching to state banks for funding) becomes clearer and clearer as problems linger on the global financial markets,” Gazprombank’s Trofimova said.

Russia’s big state-linked banks — Sberbank, VTB, Gazprombank and Rosselkhozbank — control around half of banking sector assets and their relatively cheap cost of funding has made it tough for private-sector players to compete.


But if international debt markets remain closed, that will limit Russian lenders’ ability to fund such rapid growth, forcing them to rely on deposits and liquidity from the state, which may not be freely available.

The central bank cut its daily limit for one-day repo operations threefold to 40 billion roubles ($1.25 billion) on Monday, moving away from year-highs of 700 billion roubles seen in October to avoid downward pressure on the rouble.

The central bank was seen ‘snagging’ liquidity in the aftermath of a parliamentary election on Dec. 4 that cut the majority of the ruling United Russia party and triggered popular protests over alleged election fraud.

On Monday, demand for the central bank’s short-term liquidity hit 134 billion roubles, indicating banks’ inability to fully fund operations by deposits amid tough international debt markets.

Weak markets also pose a threat of slower-than-expected economic growth for Russia, forcing companies to rein in borrowing to finance capital investment, with customers limiting their savings held in banks.

Growth in retail deposits has almost halved in the first 10 months of the year to 10.8 percent, but corporate deposits rose threefold to 17.1 percent, central bank data show.

At a time of liquidity shortages, which started on the Russian market in September, banks are raising deposit rates to attract funds as a temporary measure to ride out a loss of available and affordable liquidity on the interbank market.

The average rate offered on rouble mid-term deposits added half a percentage point in October month-on-month to 4.5 percent, while some banks are advertising deposit rates of as high as 12.5 percent to attract much-needed funding.

Alfa-Bank, Russia’s largest privately owned bank, sent a message to its clients, promising New-Year gift vouchers for customers who keep a minimum balance on their accounts from Dec. 19 to Jan. 30.

“Russian banks can ultimately grow their loan books in line with deposits, and higher deposit rates should stimulate increased deposit inflows,” said Andrew Keeley, senior analyst with Troika Dialog.


The government expects economic growth to slow next year to 3.7 percent versus 4.2 percent this year, with inflation at 5-6 percent, down from around 7 percent in 2011.

“In 2012 Russia will finally lose its pre-crises status of a country with superior economic growth,” said Ivan Sinelnikov, an analyst at Trust bank.

Inflationary risks however, will be balanced in a scenario when international capital markets are closed for Russian borrowers next year, said Gleb Shpilevoy, an analyst with Raiffeisen Bank International.

“Such a scenario implies increased macroeconomic risks and also risks for growth. The official GDP growth forecast for 2012 appears to be fairly optimistic, we forecast growth of only 3.2 percent,” Shpilevoy said.

Raiffeisen’s forecast matches a recent Reuters economic poll , which envisages no heavy borrowings on the back of a lower business activity and weaker demand.

“This will be the mirror image of the 12 percent in bank lending growth that we are forecasting,” said Ivan Tchakarov, Chief Economist at Renaissance Capital. ($1 = 31.9550 Russian roubles) (Additional reporting by Andrey Ostroukh and Oksana Kobzeva, Editing by Mark Potter)

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