overview of the situation in the Russian banking sector in March 2020


© RIA Novosti, Vladimir Trefilov

RIA Rating – 30 APR. Statistics of the Russian banking sector, in terms of the dynamics of the assets at the end of March was very strong, however, the Parallels lead us to December 2014, the period of strong crisis in the financial system of Russia. According to the Bank of Russia, total assets in nominal terms in March grew by an impressive 6.7 per cent that was the second result on the rate of growth since 2009. The asset growth rate in nominal terms in March are unable to get ahead only the result of Dec 2014, when monthly employment growth of 9%. The real growth rate in March was significantly less in 2014, which is not surprising against the background of much of the weakening of the ruble. The volume of assets in real terms in March increased by +3,3%, which is second only to the results of December 2014 (5.1 percent). Basically such a strong real increase was a result of the liquidity support of the banking sector by the monetary authorities. In General, a rolling 12-month period, ending April 1, 2020, assets of banks grew by 13.1% in nominal terms and 8.9% in real terms.

It is worth noting that after a sharp rise in assets at the end of 2014, beginning of 2015 has seen a significant decline in assets. According to analysts at RIA Rating, the situation in 2020 still looks better than in 2014-2015, and a corresponding reduction in assets in the medium term should not be significant.

The dynamics of lending to the economy in March was also characterized by very high growth rates. The volume of credits to economy over the month increased by 5% in nominal terms and by 2.3% in real terms. In this case monthly growth rate of loans to the economy in nominal terms was a record since March 2009. In turn, the result in real terms was good, but not for such a long period. In particular, similar growth rates were observed in April 2013 and in September 2012. A rolling 12 month period (1 April 2020) the growth of lending to the economy amounted to 9.5 percent (by 1 April 2019 is similar to the growth of lending to the economy was equal to +11%). The decline in real growth largely is due to the slowdown of lending to individuals, and to a lesser extent, corporate lending.

The loans for legal entities (all entities except credit institutions) in March was characterized by significant growth in nominal and real terms. The volume of loans to legal entities for the month rose in nominal terms by 6.6% and by 2.6% in real. The result in nominal terms was the highest since March 2015, and in real terms – with the end of 2011. According to analysts at RIA Rating, a sharp increase of corporate lending can be explained by the situations in the economy due to the coronavirus. In the face of uncertainty, the company has used its credit lines as well as part of the strategic enterprises received soft loans, which were announced by the government to overcome the recession due to the coronavirus. In General, a rolling 12-month period, as of 1 April, the growth of corporate lending in real terms was 6.1%, against 6.4% on the same date in 2019 (also for 12 months). Analysts at RIA Rating expect the rate of growth of corporate lending in the coming months can be quite high in terms of supporting the economy because of the coronavirus.

Lending to individuals in March have accelerated. According to the Bank of Russia, the volume of consumer loans in real terms for the month rose 1.6% against the growth of 1.2% and 0.8% in February and January, respectively. However, the last time the rate of growth of loans to individuals was higher in August 2019 (+1,8%). It is worth noting that the low growth rate of end 2019 – the beginning of 2020 was a result of the introduction of MPC and a few for the securitization of loan portfolios. While a good result in March, according to analysts at RIA Rating, was due to increased demand for borrowed funds from the population because of expectations of increasing interest rates on loans and tightening of credit conditions on the one hand, and on the other, due to concerns over rising prices for imported durable goods (often bought on credit). On a sliding 12 month period, which ended April 1, retail lending in real terms has increased by 17.8% versus 20.7 per cent and 23.9 per cent on 1 October and 1 April 2019. Thus, even this small surge could not reverse the trend of declining sliding rate of credit growth. Analysts at RIA Rating expects that in April the rate of growth of retail lending will not be as large as in March due to isolation, and perhaps we'll even see a decline.

Passive base of the Russian banking sector in March were hit by a strong currency revaluation. The volume of deposits and funds on accounts of legal entities in nominal terms over the month grew by 2.1% and 7.4% respectively. In this case, if the rate of growth of household deposits was comparable with previous months, the growth of funds of legal entities was the largest since January of 2016. In turn, the dynamics in real terms was much weaker, thus, the volume of deposits decreased by 1%, while growth in corporate customers ' funds amounted to +2.1 percent.

The profit of the Russian banking sector in March was very good. According to the Bank of Russia, banks in the past month earned 219 billion rubles, which was the third monthly result in history. The second monthly result in the history was also in the beginning of 2020 (January – 223 billion). In the beginning, banks made a profit of 612 billion. For comparison, in the most profitable 2019 on April 1, the profit amounted to 587 billion rubles, and in 2018 – 353 billion. On a sliding 12 month period, as of April 1, banks managed to earn a little more than 2 trillion rubles, which is 30% more than on April 1, 2019 (also for 12 months). It is worth noting that in the coming months, the profit of the banking sector may significantly decline, which may be associated with the revaluation of the quality of individual assets.

The situation with revocation of banking licenses in March-April was very calm. So, in less than two months was not revoked any licenses, and the three banks were liquidated. It is worth noting that the last time such a long lull in the forced withdrawals were far in 2013. In the beginning of the year was forcibly withdrawn only 4 of the license of banks and non-Bank credit institutions, by the standards of recent years is a very small amount.

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Source: 1prime.ru

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