The Russian banking system rebounds

At the Troika Dialog Russia Forum 2011 Business RT spoke with James Watson, Managing Director of Fitch Ratings Russia about the Russian banking system.

RT:  What do you think about the recent trends in terms of consolidation?

JW:  “Well I think that the big news is that the consolidation has finally started to happen. It is something that we’ve been talking about, we’ve been expecting, for maybe ten or fifteen years.Now we see real transactions starting to happen, and we see not just state owned banks acquiring some other players in the market, we also see some private owned banks also trying to consolidate with others to increase their market share, and improve their critical mass.We regard that as a positive development generally for the sector.”

RT:  What about the risks in the sector?

JW:  “I think the risks are, perhaps, twofold.On the one hand banks are still addressing some of the problems they have from the crisis, in terms of bad loans on their balance sheets, a lot of loans that still need to be worked out, cash that still needs to be brought bank into banks from those loans.On the other hand Banks are starting to post some significant growth, in some cases. We saw the banking sector grow during the last nine months of last year, maybe by about 20% annualized. We expect something similar this year.And any growth of that kind clearly needs to be managed prudently to prevent another build up of asset quality risk.”