MOSCOW, Oct 10 (Reuters) - Russia raised bank deposit guarantees on Friday as the banking crisis deepened, with one bank’s licence revoked, another asking clients to repay mortgages and S&P putting 13 institutions on negative outlook.
With memories of painful savings losses of the 1990s and Soviet times still relatively fresh, authorities are working hard to support the banking system.
State-owned companies have already bailed out two mid-sized banks that fell prey to the crisis, and Prime Minister Vladimir Putin on Friday said guarantees on personal bank deposits will now cover 100 percent of the first 700,000 roubles ($26,760), the equivalent of nearly 40 average monthly wages.
The announcement came on a day of more news for the Russian banking sector, which has seen foreign sources of funding blocked by the global credit crunch, and the liquidity problems exacerbated by the flight of investor capital from Russia.
The sharp sell-off in shares — with Moscow bourses down 56 percent since the start of August — has eroded the value of collateral used in repo loans, sparking wide-spread margin calls and leaving some organisations unable to meet obligations.
Standard & Poor’s ratings agency put 13 of Russia’s financial firms on negative outlook on Friday, including big players such as investment banks Troika Dialog and UralSib (USBN.RTS) and Russia’s largest privately owned bank, Alfa Bank.
“The outlook revisions reflect our growing concerns about the adverse impact of the ongoing domestic and international market turbulence,” S&P credit analyst Ekaterina Trofimova said in a statement.
“We expect that higher funding costs and reduced access to the debt markets will continue to put pressure on banks, especially the small and mid-size ones and those which have sizeable amounts of debt maturing in the coming months.”
Analysts and bankers say not all of Russia’s 1,000-plus banks will be able to survive the crisis.
“Over the coming year, the state will have to take steps to force a consolidation of the banking sector to ensure that many of the weaker institutions are absorbed into better-capitalised entities without causing debt defaults that would threaten the system more broadly,” Goldman Sachs said in a research note.
Small, Moscow-based Eurasia Centre bank on Friday became the first to have its banking licence revoked by the central bank over “significantly unreliable” accounts and inability to meet creditors’ demands [ID:nLA629112].
Mid-sized lender Rosevrobank has asked clients to repay their mortgages straight away rather than risk the prospect of real estate prices falling 30 percent [ID:nLA112942].
The big, state-owned players are also feeling the pinch.
VTB-24, the retail banking arm of VTB (VTBR.MM) is reducing investments and is not ruling out job cuts [ID:nL9624511].
Russia’s largest lender and most trusted bank, Sberbank SBER03.MM, has changed its strategy to focus on loan quality over credit growth, and has hiked interest rates on new loans.
As well as guaranteeing deposits, Russian authorities have focused much of their $210 billion market rescue package on measures to boost banking sector liquidity and encourage banks to pass money down the chain to smaller players.
But analysts say it is a slow process of confidence rebuilding — which means for some players it may come too late.
Overnight interbank money-market rates held near 10 percent MOSPRIME= on Friday compared to levels of around 4 percent in May-July, illustrating the lack of available credit.
“The size of the support package of the banking sector is impressive ... and part of that is aimed at the medium-sized banks,” said Yaroslav Lissovolik, strategist at Deutsche Bank.
“The problem is many of these measures have not yet come into effect.” (Reporting by Denis Dyomkin and Simon Shuster, writing by Toni Vorobyova; Editing by Hans Peters)