Russia’s banking sector is starting to recover after a catastrophic summer and is back in overall profit – just.
Russia’s banking sector earned an aggregate profit of just RUB18bn ($300mn) in the first 10 months. However, if you exclude state-owned retail giant Sberbank’s stellar third quarter results, then the sector is actually still loss-making.
Until September monthly profits were running well ahead of last year’s results, averaging between RUB100bn and RUB200bn for most of the year. But the sector was walloped in September when it booked an aggregate loss of RUB322bn because of the near-miss banking crisis in the summer caused by the collapse of Financial Corporation Otkritie, which the Central Bank of Russia (CBR) was forced to bail out at the end of August, followed by sister “Garden Ring” bank Binbank a few weeks later.
Among the biggest bailouts in Russia’s history, the clean up of the Russian banking sector is likely to take between one and two years, Elvira Nabiullina, chairwoman of the Central Bank of Russia (CBR), said on November 2.
Despite the slow return to health of the sector, banks are still operating in a toxic environment and more than half of Russian companies consider the sector to still be in crisis, a study found this week.
Companies are still unwilling to borrow from banks because of the high cost of money. Loans to companies have fallen for a year and now are ticking over at a low level, as companies prefer to borrow cheaper for longer on the international capital markets if they can. A series of cuts to the monetary policy rate by the CBR this year has made domestic borrowing more attractive, but the rates are not expected to make a difference to the corporate borrowing volumes until next year, according to analysts. The corporate loan portfolio declined 3.6% y/y in October (and was down -1.2% y/y, if you exclude the FX factor, as the ruble strengthened 8.0% y/y), the CBR reported.
Retail lending, on the other hand has come back to life this year and expanded a robust 9.9% y/y in October, which has given economists some cause for optimism.
They speculate that consumption is slowly returning as an economic driver. So far this year’s increased retail spending, such as it is, has been largely fuelled by consumer credits as real disposable incomes are flat and retail turnover growth is still hovering just above zero....MUCH MORE