IFK Metropol: After a year of global financial crisis and economic downturn
RT: Where is our banking system now, after a year of the global economic crisis?
LS: Today Russia’s banking system is showing signs of a recovery with foreign investment again in place as the main driver. From the summer of 2008 until April 2009 foreign markets were almost closed for Russia, and Gazprom was probably the first to conduct a placement of Eurobonds denominated in Swiss franks in April this year. Maybe, there were some deals before that but, I think, those were mostly arranged earlier.
However, that was followed by Rostelecom’s and Vnesheconombank’s Eurobond issues, in Swiss Francs, this June, and in July there was a triple oversubscription to VTB’s shares. Furthermore, Bank Saint Petersburg and Troika Dilaog received subordinated credits from EBRD of $75 million and $150 million respectively. So, international capital started to flow into the country again, which is important as Russia’s banking sector is about 20% dependent on foreign investment.
RT: How is Russia’s banking sector handling debt?
LS: Russia’s banks are mostly trying to pay past debts to its foreign lenders. They cut their credit portfolios, using the money of their clients to pay debts first, and with the foreign markets open anew to Russia they have more chance to refinance their debt.
We estimate that if the banks pay half of the foreign debt, they’ll get $7.7 billion Revenue in 2009, which is 1.5%, or $110 million, less than our initial forecast. Another scenario takes an 80% figure, and in this case Russia’s banking system will see 0.6%, or $44 million, less Revenue.
RT: Which banks performed the best?
LS: Sberbank, Vozrozhdenie Bank together with Bank Saint Petersburg have shown the best results. All of them have a sound structure of funding and Revenues, which are mostly the Revenues from their core activities.
RT: When do you expect the Russian economy to show clear signs of a rebound?
LS: I think, in 2Q 2010 the situation will become clear as this is the deadline for restructured non performing loans, which will unveil the real scale of trouble in Russia’s banking system. So, after that, when the amount of NPL decreases, banks will start recovering their reserves, which will directly influence profit and their capital.
However, we forecast that this year Russia’s banking system will have about 12 – 14% of NPL with the majority of banks providing for almost 100% debt coverage.