International rating Agency Standard & Poor’s predicts that Russian banks will operate this year under very difficult conditions. The Agency expects the continuation of the revocation of the banking license and Bank failures, mergers and acquisitions in the banking market, as well as deterioration of asset quality and loan portfolios.
A weak ruble and low oil prices will continue to have a negative impact on the financial performance of Russian banks in 2016, in particular on indicators of capitalization, which will decline because of rising costs of the reserves, the report notes S&P. the Agency estimated that in 2016 up to a quarter of the loans granted by banks, fall into the category of “problem” (including overdue for more than 90 days and restructured loans).
As the situation deteriorated credit portfolios of the banks will have to allocate more and larger amounts for possible losses on unrecoverable loans. In 2016 these costs can be 3.5-4.5% of the total loan portfolios that will affect the indicators of Bank capitalization.
Apart from the fact that the weakening of the ruble had a direct negative impact on the borrowers ‘ ability to service and repay debt denominated in U.S. dollars and other foreign currencies, devaluation of the national currency is also having an indirect negative impact on some economic actors, as the weakening of the ruble affects the level of domestic prices.
“It should also be noted that the decrease in banks’ profits due to the worsening economic situation in Russia and the still high level of cost of funds, may limit their ability to generate capital through internal sources and increase the need for new infusions of capital from shareholders,” — said credit analyst Standard & Poor’s Sergey Voronenko.
According to analysts, the majority of Russian banks are not well capitalized and in 2016 at best can achieve only breakeven. “We continue to believe that the government will support the Russian banking sector, but is unlikely to give him as big a financial aid package,” — noted in the Agency.
In the S&P pay attention to the fact that the average rating of the Russian banks are close to “In” is one of the lowest average ratings, banking sectors in the EMEA (Europe, middle East, Africa). Of the 37 Russian banks with ratings S&P 31 — negative predictions or ratings are on review for possible downgrade.
According to the Bank of Russia, in 2015, the retail loan portfolio of banks decreased to 10,68 trillion rubles made 11.32 trillion roubles in 2014. The level of overdue retail loans increased by 2.6 percentage points to 10.5%. In January 2016 the share of loans with payments overdue more than 90 days, according to the regulator, was 10.7% up from started the year by 0.2 percentage points, (1.97 trillion rubles). The portfolio of credits to the population has decreased from 10.27 trillion to 10,22 trillion.