OREANDA-NEWS. March 26, 2009. Russian banks could post no profit in 2009 due to NPL reserves if overdue loans reach 10%, Head of Banking Regulation and Supervision Department of the Bank of Russia Alexei Simanovsky claims. “We estimate NPL to come in at about 10%. This is a conservative outlook for us. If this is the case, banks will have to allocate RUB 1.5 tn to reserves” he said. “If banks have to create such reserves, there will be no profit in the whole banking system”.

In 2008, Russian banks posted RUB 400 bn in profit. The Bank of Russia reported an increase in bank deposits. “In February, according to preliminary data, deposits slightly rose, with growth slightly more than 1%”, he said and noted that an increase was mainly attributable to a rise in ruble-denominated deposits. In addition, the share of forex revaluation in growth “is not denominated”. Simanovsky believes that the resumption of growth in ruble-denominated deposits is “a kind of trend”, although there are no significant changes in the breakdown of ruble and forex deposits. Private ruble-denominated deposits should remain on an upward track. “I proceed from the assumption that the exchange rate will remain stable in the coming months, therefore, the trend will remain in place”.

Last year, CBR became entitled to limit the maximum amount of bank deposit rates in order to reduce the risks that banks assume. However, the regulator has not exercised this prerogative yet. “We have been watching the rates and, in our opinion, it is possible to recommend that individual banks lower their rates. There are no more than five such banks…they are located in various regions, but there are Moscow-based lenders as well”, Simanovsky said. CBR will establish the maximum rate depending on the situation in each region and focus on average rates on this market. “The first decisions, if adopted, will be in early April”, he said and added that to begin with, CBR is attempting to talk banks into lowering rates.