OREANDA-NEWS. 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 issue (available at www.fitchratings.com or by clicking the link above) includes:
- Balance sheet numbers as of 1 April 2016, as well as changes during March 2016 and since 1 January 2016
- Profit and loss statements for 3M16 and 2015 with associated ratios
- Charts illustrating balance sheet changes in 3M16 for the main state-related, privately-owned, foreign-owned and retail banks
- Special report on the main changes to the figures and trends in the Russian banking system in 1Q16

Fitch notes the following key developments in March 2016:

Sector corporate loans nominally dropped RUB1.5trn (-4%), but grew marginally by RUB51bn (0.1%) after adjusting for a 10% rouble appreciation against the US dollar. Notable growth was seen at Credit Bank of Moscow (CBOM, RUB41bn, 5%), Russian Agricultural Bank (RUB32bn, 2.2%) and Bank Rossiya (RUB20bn, 7%), while the biggest decrease was at VTB (RUB118bn, -2.4%).

Retail loans nominally contracted by RUB53bn (-0.5%) or by only RUB15bn (-0.1%) after adjusting for the FX effect. The growth was mainly in state-owned Sberbank (RUB17bn, 0.4%) and VTB24 (RUB18bn, 1.2%). Among retail banks only Tinkoff grew, by 1.5%. The books of Russian Standard and Orient Express contracted 4%-7%, partially due to write-offs or sales of bad debts, while Home Credit, OTP and Rencredit deleveraged by 1%-3%.

Customer funding (excluding that from government entities) decreased RUB1.7trn in nominal terms (-3.3%), but grew RUB487bn (1%), after adjusting for exchange rate effects. The latter figure comprised inflows of both corporate and retail deposits of RUB249bn (0.9%) and RUB238bn (1.1%), respectively. The biggest FX-adjusted increase of corporate funds was seen in Sberbank (RUB300bn, 4%), Unicredit (RUB154bn, 21%), Promsvyaz (RUB42bn, 7.7%) and CBOM (RUB29bn, 3.6%). At the same time, considerable outflows were reported by VTB Group (RUB82bn, -1.5%), Globex (RUB24bn, - 29%,), Ak Bars (RUB18bn, -8.8%) and Alfa-Bank (RUB36bn, -4.5%). The outflow at Globex was mostly pension money due to the bank not qualifying for a new rating requirement by the Central Bank of Russia (CBR) of maximum two notches below the sovereign. Since the CBR postponed this requirement until October Globex's funding outflows have stopped.

State funding nominally decreased by RUB191bn (-3.4%), or by a smaller RUB47bn (-0.9%) net of exchange rate movements. Repayments of RUB327bn to the Finance Ministry and FX repo funding repayments of RUB189bn to CBR were largely offset by RUB193bn of new borrowings from regional and other budgets, an increase of RUB234bn of rouble repo funding from the CBR and receipt of a further RUB42bn from other government entities.

The increase in CBR rouble funding was solely due to VTB, as it substituted most of the RUB283bn it repaid to the Finance Ministry. We expect the repayment of the CBR rouble funding to continue, with the sector paying down most of the outstanding amount by end-3Q16 and starting to accumulate excess rouble liquidity. We believe the CBR is concerned about the potential impact on inflation if banks use this liquidity too quickly to issue new loans, and is therefore considering various options to sterilise liquidity (eg. in April-May it reportedly sold sovereign bonds to the banks).

CBR FX funding decreased by USD3bn to USD16bn in March, largely due to repayments by B&N Bank, Russian Standard, Sovcombank and Promsvyaz (each repaid USD0.3bn-USD0.5bn during the month). Almost USD14bn of the remaining outstanding sector FX borrowing from the CBR was utilised by Otkritie, of which about USD11bn was used to buy approximately 74% of the Russian Eurobond issue due in 2030. The unwinding of this transaction in the foreseeable future is unlikely, in our view, as it may the hamper sovereign's borrowing plans, and we expect the FX funding of Otkritie to be rolled over.

The sector reported a RUB12bn net profit in March (1.9% annualised ROAE). Sberbank alone earned RUB41bn (20% ROAE) but also recognised negative RUB17bn adjustments to past years' earnings directly in equity. The rest of the sector, after taking into account negative RUB29bn of adjustments to past years' earnings recorded a loss of RUB58bn (ROAE -9%).

Considerable losses were reported by Alfa-Bank (RUB11bn, -5% of end-February equity, mainly due to currency losses) and Jugra-Bank (impairment-driven RUB23bn, -90%, fully compensated by shareholders' aid). Among retail banks, Home Credit and OTP respectively recorded considerable profits of 2.6% and 1.7% of end-February equity. Tinkoff was marginally above break even, while others (Russian Standard, Orient Express and OTP) lost 1%-5% of end-February equity.

The weighted average capital ratios of the sampled banks improved 30bps-50bps in March, due to the 10% rouble appreciation causing a deflation of FX risk-weighted assets. The core tier 1 ratio (N1.1) increased by 44bps to 8.1% (minimum 4.5%), tier 1 (N1.2) by 46bps to 8.4% (minimum 6%) and total capital ratio (N1.0) by 36bps to 12.4%.

We estimate that current capital buffers (excluding potential future profits) of 48 of the sampled banks (excluding already failed and rescued banks, and those not reporting capital ratios) are sufficient to absorb potential loan losses equal to less than 5% of loans, and six could absorb less than 1%. The latter are VTB24, Leto Bank, Pervobank, MDM, UBRIR and Moscow Industrial bank.