February 9, 2017 / 11:48 AM / 10 months ago

Fitch Publishes 2016 Russian Banks Datawatch

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Russian Banks Datawatch 12M16 here MOSCOW, February 09 (Fitch) 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 publication includes: - Balance sheet numbers as of 1 January 2017, as well as changes during December 2016 and since 1 January 2016 - Profit and loss statement for 2016 - Charts illustrating balance sheet changes in 2016 for the main state-related, privately owned, foreign-owned and retail banks - Special report on the main changes in the figures and trends in the Russian banking system in 2016 and 4Q16. The following events in December were important drivers of the banking sector trends outlined further below: - The Ministry of Finance (Minfin) sold USD15 billion of currency reserves to the Central Bank of Russia (CBR) to finance budgetary expenses, receiving RUB0.9 trillion in return; - Minfin reportedly paid RUB0.8 trillion, mainly to state banks (of which Sberbank and VTB received about RUB0.3 trillion each), under guarantees for loans they had provided to defence companies in 2011-2012; - Oil company Rosneft issued RUB0.6 trillion of local bonds in what seemed to be a structured transaction (potentially, the bonds were used as collateral), as banks' corporate securities books did not increase in December; - Russian state holding company Rosneftegaz sold a 19.5% stake in Rosneft for about EUR10.5 billion (RUB0.7 trillion), reportedly to a consortium of Qatar Investment Authority and commodities trader Glencore. According to Glencore's press-release, Russian banks were involved in the financing of this transaction. Rosneftegas subsequently transferred the privatisation proceeds and dividends to MinFin (RUB0.7 trillion). Fitch notes the following key trends in the banking sector in December 2016: Sector corporate loans nominally contracted by RUB797 billion (2.2%) in December, but after adjusting for 7% rouble appreciation against the dollar were about flat (plus RUB37 billion, 0.1%). However, stripping away the loans related to the above RUB0.8 trillion guarantee payment by Minfin, corporate loans grew by about RUB0.8 trillion (2%). Sberbank's and VTB's corporate loans (net of the impact from Minfin guarantee payments) grew by about RUB50 billion-RUB150 billion each (0.5%-3%), while notable increases were also reported by National Clearing Centre (RUB229b billion, 87%, reverse repo), Gazprombank (RUB123 billion, 4%), Credit Bank of Moscow (RUB111 billion, 13%, largely rouble reverse repos) and Alfa-Bank (RUB65 billion, 5%). Issuance of RUB0.8 trillion of corporate loans in one month is an anomaly, and could be related, at least partially, to the financing of the Rosneft privatisation, as per Glencore's press-release. Retail loans grew a modest RUB15 billion (0.1%), after adjusting for exchange rate moves. The growth was mainly in Sberbank (RUB21 billion, 0.5%) and VTB24 (RUB27 billion, 1.7%), while other banks on average deleveraged by 0.6%. Among specialised retail banks, Home Credit, Tinkoff and Rencredit grew by 1%-2%, Orient Express and Russian Standard deleveraged by 1% and OTP was stable. Customer accounts (excluding those from government entities) nominally increased RUB303 billion (0.6%), but after adjusting for currency moves, grew by a sound RUB1.5 trillion (3%), comprising growth of RUB0.5 trillion (2%) of corporate and RUB1 trillion (4%) of retail deposits. This growth was largely driven by a spike in MinFin's budgetary spending in December. The largest FX-adjusted inflows of corporate funding occurred in Gazprombank (RUB247 billion, 9%), Rusag (RUB84 billion, 7%), FC Otkritie (RUB51 billion, 7%) and Alfa (RUB67 billion, 9%), while notable decreases were seen in Unicreditbank (RUB40 billion, -6%), Bank Avers (RUB28 billion, -33% due to one large depositor outflow but not a concern due to large liquidity buffer) and Russian Standard (RUB19 billion, -26% largely due to Eurobond repayment). Retail funding growth was broadly even across the sector. State funding nominally decreased (adjusting for currency moves) by RUB933 billion (-21%), as Minfin and regional budgets withdrew their maturing deposits to finance budgetary expenses. Overall, banks repaid RUB506 billion to Minfin, RUB657 billion to regional and federal budgets and RUB84 billion to other government entities, but borrowed RUB314 billion from the CBR. The largest repayments to Minfin and to budgets were made by VTB Group (RUB370 billion and RUB305 billion, respectively) and Gazprombank (RUB41 billion and RUB164 billion). Remaining state funding was RUB2.4 trillion (excluding RUB0.7 trillion of FX repo and the CBR's RUB0.5 trillion subordinated loan to Sberbank), of which the main users were VTB group (58% of the RUB2.4 trillion; 12% of group liabilities), Gazprombank (14%; 7%) and Rusag (7%; 7%). These banks' continued dependence on rather expensive state funding weighs on their funding costs. Since deposit inflows mostly offset withdrawn government funding, and loan growth was probably at least partially of a non-market nature, inflationary pressure was moderate. To sterilise some excess liquidity, the CBR conducted four one-week deposit auctions in December for RUB250 billion-RUB400 billion each, while the outstanding amount of bank auction placements with the CBR at the end of the month was only RUB0.6 trillion (0.9% of banks' assets). The sector reported RUB139 billion net profit (annualised ROAE of 21%) in December; however, of this Gazprombank earned RUB78 billion (200%; this is largely due to a one-off RUB87 billion loan provision recovery and not related to the announced recapitalisation of up to RUB85 billion by Gazprom, which is to be made in 1H17) and Sberbank a further RUB34 billion (14%). Considerable impairment-driven losses were reported by Jugra (RUB5 billion, -29% of end-November equity, compensated by material aid from shareholders) and by two banks owned by VEB: Sviaz-bank (RUB12 billion, -57% of end-November equity, fully compensated by a RUB16 billion subordinated debt conversion into equity) and Globexbank (RUB6bn, -23% of equity, consuming 64% of a RUB9 billion injection made in November). Among specialised retail banks, Tinkoff, Home Credit, OTP and Rencredit were profitable with annualised ROAE in the range of 20%-40%. Orient Express reported a RUB1 billion net loss (-5% of end-November equity), while Russian Standard showed a RUB2.6 billion net profit, which net of a deferred tax gain was a RUB0.6 billion (-1.4%) loss. The sampled banks' average capital ratios improved by 40bps-60bps in December due to modest lending growth, devaluation of FX risk-weighted assets due to rouble appreciation and moderate profits. The average total capital ratio was 13.5% at end-2016 (required minimum, excluding buffers, of 8%), Tier 1 9.5% (6%) and Core Tier 1 9.3% (4.5%). All 10 systemically important banks (SIBs) complied with the Tier 1 ratio requirement (including buffers) of 7.6% applicable from 1 January 2017, although Gazprombank (8.2%) and Promsvyazbank (8.1%) had only moderate headroom. Gazprombank should improve its Tier 1 ratio by approximately 200bps once its 2016 profit has been audited (this is currently treated as Tier 2 capital) and by a further 150-200bps when it receives new capital from Gazprom. We estimate that at end-2016 capital buffers (excluding potential future profits) of 28 of the sampled banks (excluding already failed and rescued banks, and those not reporting capital ratios) were sufficient to absorb potential losses equal to less than 5% of loans. The latest Datawatch is available at www.fitchratings.com or by clicking the link above. 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