Retail banks began to get out of losses

More than half of the retail banks were able to profit or to reduce losses in the first quarter of 2016, according to the data of quarterly reports on the website of the Bank of Russia. Of the 14 banks, the assets of which loans exceed 40%, eight finished the first quarter with a profit. A year ago there were seven. The overall financial result of the banks 14 a positive — they made a profit of 850 million rbl. It is much better than a year ago, when the total financial result of the same 14 banks was negative — their net loss amounted to slightly more than 30 billion rubles.

Profitable banks

Retail banks started to feel better for two reasons: first, reduced cost of funding, and secondly, decreased the risk due to tightening credit policies of banks.

The lower cost of funding impact on the financial result, VTB24, says Fitch Ratings analyst Dmitry Vasiliev. The Bank showed the best result for the quarter, retail credit organizations — he received a profit of 4.69 billion rubles a Year earlier, VTB24 received a loss of 8.1 billion rubles.

“In the beginning of 2015, VTB24 and many other banks attracted deposits of corporations under 18-20% per annum, now their term has expired, and the yield of new deposits is significantly lower (10 percentage points),” explained Vasilyev. According to statements of the Bank, its interest expense decreased in the first quarter of 2016 to 6 billion rubles. to 41.3 billion rubles compared to the same period in 2015. Most significantly, VTB24 reduced the cost of interest on funds borrowed and deposits of companies (from 16.3 to 5.8 billion rubles). The Bank press service refused to comment.

The tightening of credit policy helped “Tinkoff Bank”. Its net profit in the first quarter of 2016 has increased compared to the same period in 2015, almost three times to RUB 2.1 bn. As stated by the official representative of the Bank Darya Ermolina, increase profit according to RAS due to growth in net interest income, as well as to improve the quality of the loan portfolio. “We have tightened credit policies. The share of approved Bank loans decreased during the year from 20% to 15% It is possible to reduce the cost of risk of the Bank (reducing the cost of risk results in lower costs of reserves. — ) and gradually build up its loan portfolio,” she said.

The reducing risk in the loan portfolio described in the Post Bank (previously the Summer the Bank). In January-March the Bank made a profit of 106,6 million rbl. against a loss in the I kvartali 2015 112,7 million roubles-Mail Bank reduced risks due to “technological and organizational innovation”, reported the press service of the credit institution. “Bank employees used biometric technology of face recognition and verification of the contact data specified in credit bids, in the presence of the client. This helps to prevent the granting of loans on forged or stolen passport, to exclude from consideration the claims with unreliable contact data and to weed out potentially insolvent borrowers,” — says the press-service.

Another reason for the improved situation in the sector of retail lending, according to Vasileva from Fitch Ratings, that “with balance sheets gradually left the most problematic loans 2011-2013”.

Still in loss

Despite the overall improvement in the situation, many retail banks remain unprofitable. Mainly, this is due to the creation of reserves. Because of lower incomes the share of overdue retail loans in banks continues to grow, says senior banking sector analyst of the company “Aton” Michael Ganelin. “In February, it reached 8.4 per cent, although at the end of last year was about 8%. This situation forces banks to continue to create additional reserves, resulting in a net loss,” he concludes.

For example, “Renaissance credit” received a loss of 1.5 billion rubles, reducing it however in comparison with the I quarter of 2015 almost half. According to analyst S&P Viktor Nikolsky, the financial result linked to the creation of reserves. “The Bank that makes the last two years, with the support of shareholders,” he says. As the analyst notes, if necessary, the support of the shareholders of the Bank will be provided in the future, so long as he’s not going to change their business model and to leave the market of retail lending.

In the first quarter of 2016, five of the 14 banks has reduced its loss compared with the same period of 2015.

HCF Bank in reduction of the loss in 6.6 times to RUB 817 million explained by the reduction of costs as a result of lower interest rates on deposits. “The Bank has completed a program of optimization of their costs. The main focus of our work currently is the improvement of credit risk indicators”, — said the press service of the Bank “home Credit”.

In OTP Bank reduce operational costs and increase the efficiency of branches and points of sales, said the President of the credit organization Ilya Chizhevsky. According to him, by the end of 2015, the Bank could show a profit, however, management has decided to assess additional provisions for retail and corporate loan portfolio in a larger size than required. “This was done to form an additional safety cushion in case of adverse macroeconomic scenario in 2016”, — said the scientist.

On optimizing the business model work in a Bank. Its loss in the first quarter of 2016 amounted to 175 million rubles, having decreased in comparison with the 1st quarter of 2015, more than 30 times. “We see the opportunity to earn and in the current market, and therefore make efforts to expand business in regions where we are profitable, and planning to develop the direction of remote sales,” reported the press service of the Bank “East”. In the second half of 2016, the Bank expects to show a positive financial result.

The only Bank, which is the result in the 1st quarter of 2016 is worse than in the I district 2015 — “Delta the Credit”. If in January-March of last year the Bank showed a profit of 243 million rubles, in January-March this year — a loss of 1.85 billion rubles due to the restructuring of foreign currency mortgage loans.

In absolute terms the worst result was demonstrated by the “Russian Standard” — its loss was 6.5 billion roubles, almost unchanged compared with the 1st quarter of 2015.

What’s next?

The economic situation is unfavourable to consumer lending: rising unemployment, reduced incomes, reminds Vasiliev from Fitch Ratings.

Mikhail Ganelin from “Atona” I am confident that gradually the situation in the retail banking market should improve. “For example, now banks have seriously tightened criteria for issuing loans to borrowers, new borrowers, a higher quality and will responsibly pay the debts,” he says. However, the process of returning to profitable levels for retail banks, according to the analyst, it may take more than a year.

In RAEX expect growth in demand for consumer loans in 2016. “Now it is limited, on the one hand, relatively cautious credit policy of banks with other customer concerns related to the loans, against the background of uncertainty in the stability of his economic situation”, — says the Director for Bank ratings RAEX Alexander of Sarajevo. “The relative stability on the currency market allows to hope for increase of consumer activity of the population and the realization of pent-up demand for loans,” — said the expert. In addition, according to her, if the Bank of Russia will reduce by year end key rate by 1-2 percentage points, it will also provide support to consumer loans.