Fitch Publishes 7M15 Russian Banks Datawatch
The issue (available at www.fitchratings.com or by clicking the link above) includes:
- Balance sheet numbers as of 1 August 2015, as well as changes during July 2015 and since 1 January 2015
- Charts illustrating balance changes in 7M15 for the main state-related, privately-owned, foreign-owned and retail banks
In addition, Fitch notes the following key developments in July 2015:
-Sector nominal corporate loan growth of RUB995bn (2.3%) in July was actually lower at RUB215bn (0.6%) if adjusted for 6.2% rouble depreciation against the dollar. The larger FX-adjusted growth was in Alfa (RUB47bn, 4%), Credit Bank of Moscow (RUB41bn, 9.5%) and Jugra (RUB28bn, 16.5%).
-Retail lending marginally decreased by RUB15bn (0.1%) if adjusted for the FX effect. Among retail banks, Tinkoff and Rencredit grew by 1%, Sovcombank was roughly stable, while Russian Standards, Home Credit, Orient Express and OTP deleveraged by 1%-3%. Svyaznoy's loan book contracted more significantly by 8%.
-Customer funding (excluding that from government entities) nominally increased by RUB792bn (1.8%), but net of FX revaluation decreased by RUB197bn (0.5%). The latter figure comprised RUB382bn outflow (1.6%) of corporate and RUB185bn (0.9%) inflow of retail funding. The largest corporate funding outflows were in Sberbank (RUB92bn, 1.6% of end-June balance), Gazprombank (RUB83bn, 2.7%) and Otkritie group (RUB52bn, 4.4%). In a sign of flight to quality, retail deposits grew mainly in state banks (RUB236bn increase), remained roughly stable in other sampled banks, but leaked from smaller outside the sample (RUB78bn outflow).
-State funding decreased by RUB49bn net of FX effects. This comprised repayments of RUB285bn (mainly rouble-denominated) to Central Bank of Russia (CBR) and RUB17bn to other government bodies, and borrowings of RUB120bn and RUB133bn from, respectively, Finance Ministry and regional budgets. The volume of FX funding from CBR remained the same at USD32bn.
-In July, the sector reported RUB27bn net loss and booked a further RUB19bn of negative adjustments related to last year's earning directly to equity. The largest losses were reported by Gazprombank - RUB42bn (13% of end-June equity) and Bank of Moscow - RUB17bn (14%), both due to higher impairment charges.
Gazprombank's large charges related mainly to the provisioning of Mechel exposure, with the resulting slump in capital ratios cured by RUB126bn of preferred shares (treated as core Tier 1 capital) placed in August. Sberbank earned a modest RUB11bn (0.5% of end-June equity) also due to higher loan impairment charges. Considerable profits were reported by VTB - RUB21bn (2.1%), although partly due to reserve releases (most probably one-offs) and by Alfa-Bank -RUB16.8bn (10.1%). Of retail banks, Home Credit, Orient Express, OTP and Rencredit were loss-making, Tinkoff was slightly above breakeven, while Russian Standard and troubled Svyaznoy booked sizable net profits above RUB1bn, although the nature of these gains is uncertain.
- The average total capital (N1, 10% required minimum) and core tier 1 (N1.1, 5% required minimum) ratios of the 100 sample banks on average were stable and stood, respectively, at 14.7% and 10.4% at end-July.
Four banks received sizable capital contributions: VTB - RUB307bn (over 4% uplift to core Tier 1 ratio) by way of a preferred share issue to the Depositary Insurance Agency (DIA) under a state recapitalisaiton programme; Credit Bank of Moscow - RUB13bn (2%) as a result of a new share issue mostly acquired by funds managed by local financial company Region, insurer Rosgosstrakh, and ICT Group whose shareholder also has a stake in Otkrytie (Fitch has yet to assess the quality of this new capital); Rossiysky Capital - RUB6.6bn due to DIA's subordinated debt conversion to equity (3.8%) and Almazergienbank's RUB0.9bn new equity injection by Sakha's government (4%).
- Loss absorption capacity (excluding future pre-impairment profits) is moderate. We estimate that current capital buffers of 54 of the 100 sampled banks (excluding the already failed and bailed-out ones) were sufficient to absorb potential loan losses equal to less than 5% of loans, and 16 could absorb less than 1%. The latter are VTB24, Bank of Moscow, Leto Bank, Gazprombank, AK Bars, Krayinvest, Khanty-Mansiysk Bank, Uralsib, Credit Europe, Orient Express, Rencredit, UBRIR, Jugra, Moscow Industrial Bank, Tatfond and Investtorg. Russian Standard does not report capital ratios, but its capital position is also weak.