OREANDA-NEWS The international rating Agency Moody's raised the forecast for the Russian banking system to "positive" from "stable", saying that the improvement of operating conditions should have a positive impact on the quality of assets and capital adequacy of creditors.

"The system - wide ratio of problem loans in Russia will decrease to 9.6 percent in the next 12-18 months from 11 percent at the end of 2017 and may decline even more when the Central Bank, as reported, will complete the transfer of a significant part of problem loans and non-key assets from the balance sheet of a number of large banks sanitized in 2017, to a special" bad debt Bank, " said Olga Ulyanova, Vice President and senior credit specialist at Moody's.

"Loan losses in the sector will fall to 1.2 percent of the average gross loans issued in 2018 and 2019 from 1.6 percent in 2017."

The capital adequacy ratio will improve, given the good profitability of Russian banks and the modest growth rate of lending, the Agency said. According to Moody's estimates, the ratio of fixed capital and risk-weighted assets at the end of 2019 will grow to 10.1 percent from 9.7 percent at the end of 2017.

The authorities' support for the country's banks has increased, given the state's increasing dominance in the sector after recent nationalizations, the Agency said, adding that this indicates the government and the CBR have the will and capacity to support the largest and most strategic banks.

Moody's expects Russia's GDP growth to average 1.7 percent in 2018 and 2019, while inflation will remain low. According to the Agency, the rise in oil prices will support the ruble and the expansion of the Russian economy.