In 2017, the banks can spend on provisions for possible loss of 567 billion rubles. against 188 billion rubles in 2016, says the report “Russian banking sector: Outlook to 2020”, prepared by the rating Agency of ACRE. For comparison, in 2015, the banks have spent on formation of reserves of 1.7 trillion rubles, in 2014 — 1.5 trillion. RUB. per ACRE, the possible deterioration of the quality of the loans in 2017 after a sharp improve in 2016 is explained by the fact that the real asset quality remains disguised in the accounts. “The expected growth of expenditures on reserve in the current year due to the fact that established in 2016, the banks reserves does not reflect the actual credit quality of the assets of the banking sector”, — said the head of the group Finance ACRES Kirill Lukashuk.
According to analysts of the Agency, one of the key factors in the growth of reserves on possible losses can be problems of banks with previously restructured loans. As explained in ACRE, we are talking about loans granted by banks in 2013: due to the imposition of sanctions, lower oil prices and adverse geopolitical factors, many borrowers began to experience difficulty with debt repayment, and the banks in 2015 and first half 2016 actively used the mechanism of restructuring of loans. However, to recover during the restructuring could not all borrowers, and now the number of loans banks will have to restructure again, from the point of view of credit risk management requires banks to classify the loans in the worst quality category and accrual of reserves. “We don’t see a big difference in the condition of borrowers whose debts were rescheduled, therefore, in conditions when the economic situation is not significantly improved, a high risk that they will not be able to pay my loans,” says Lukashuk.
The share of problem loans, according to the Agency, generally in the banking sector now stands at at least 15%, of which 7-8% is the share of loans overdue more than 90 days, and the rest on restructured loans. The key risks inherent in the loans to large businesses. Estimated ACRES, “lending to individuals and small and medium business, the share of forced renegotiations of relatively small — about 5% of the portfolio. In the segment of lending to large businesses this percentage reaches 10-12% (with the level of overdue debt 6% at the beginning of 2017)”.
The deterioration in asset quality of the banking system in October 2016, and warned the rating Agency Moody’s. It is estimated that in the next year the share of problem loans will increase in average for the banking system to 14-15 vs 12% at the end of 2015. Moody’s was also concerned about the large amount of restructured loans on banks ‘ balance sheets. According to official data of the Central Bank, the level of delay at banks in 2016 was 5.8%.
Forecast ACRES by the level of delay for 2017 — not less than 14%. The possible reduction in the share of problem loans by 1 percentage point. not to say that the situation has improved: the share of delay will be diluted due to the growth of banks ‘ assets. In ACRE I believe that in 2017 the growth of the Russian banking system and would resume “after the record-breaking last year’s fall (the last time a similar decline was observed in 1998), this year the banking assets will grow by 2 percent,” primarily due to retail loans and in particular mortgages. By the end of 2016, Bank assets dropped by 3.5%.
The expected growth of assets of banks will occur by issuing more risky loans, I believe in the Agency. “The reason for credit expansion in the segment of less reliable borrowers, — stated in the review. — Against the backdrop of weak credit demand, banks are likely to go on rising risk appetites, easing requirements for borrowers. Attenuation would primarily affect the segment of mortgage lending: it requires less coverage capital. The growth in risk appetite will further stimulate demand for loans due to lower quality borrowers, but will lead to higher allocations to reserves for possible losses on year-end 2017”. Thus, restructuring is the key, but not the only risk factor.
Another driver of growth in reserves — the tightening of the Supervisory practice of the Central Bank of the Russian Federation to assess the level of impairment of assets, according to the ACRE. Representatives of the Central Bank has repeatedly said that don’t always trust how financial institutions assess their own risks, and intentions to overestimate them. In the fall of 2016 the Governor of the Bank of Russia Elvira Nabiullina announced the creation of a “service risk analysis on the rights of the individual Department in the Central Bank”. It was assumed that this service will be to assess the risks for both credit and non-credit financial organizations. A reassessment of the risk in a big way requires dosoznanie reserves.
The level of risk shown by banks in 2016, in ACRE say low not only because of the reluctance of banks to show the real scale of the problems. This lowering is, and the technical component. As indicated in the survey, at the end of last year, the number of banks had a lump the dissolution of reserves issued corporate loans. In the end, the total reserves of banks at a loss in December fell by more than 276 billion rubles primarily lower level of redundancy was observed in Sberbank, VTB and Gazprombank (collectively reduced reserves Dec at 174 billion rubles).
Without considering the dissolution of reserves, return on assets would have been lower (not 1.1%, and 0.8%), and the whole banking system would have earned in 2016 of about 654 billion rubles (instead of 930 billion rubles), and in December, the banking system would have had a loss, according to a survey Agency.
VTB and Gazprombank did not respond to a request, and Sberbank declined to comment. Wednesday, February 22, at a meeting with President Vladimir Putin, the head of Sberbank German Gref reported on the improvement of the quality of the loan portfolio of the Bank. He said that the share of overdue loans in the consolidated loan portfolio of Sberbank in 2016 decreased by 1 percentage points from 3.1% to 2%. “It is certainly a very serious impact on the numbers of our profit,” — said Gref (quoted by TASS).
Pressure on margins
From the point of view of accounting reserve is consumption, which reduces profits. Due to the significant growth of allocations to reserves, analysts do not exclude that the profit of the banking sector will decline. According to the forecast in 2017, it could reach 884 billion RUB compared to 930 billion rubles in 2016. “Questions of profitability of the financial sector remain on the agenda. This is a big problem, because if some banks start problems with asset quality, all nominal profits that banks earn this year, just zeroed”, — said Kirill Lukashuk.
In 2018, growth will resume: forecast of ACRE, the profit of banks in 2018-2020 — 1,452 trillion, 1,586 1,571 trillion and trillion respectively. Expenses banks for reserves, according to Agency estimates, for these periods will amount to 392 billion to 398 billion and 386 billion rubles.respectively.
The non-recognition of problems
The interviewed participants of the Bank market consider the analysts ‘ fears of an ACRE too high. “The banks have on their balance sheets really are unserviced loans, but this can lead to an increase of the delay only in the case of the deterioration of the economic situation or crisis in the banking system” — says the analyst of PSB Dmitry Monastyrshin. However, in his opinion, this “mine is unlikely to work this year”. According to Monastyrshina, due to the decrease in rates the cost of funding for banks is reduced and they are more willing to lower the cost and increase the terms of previously granted loans. “Moreover, in the face of rising oil prices and a gradual recovery of corporate borrowers easier to service loans,” he added.
“It is clear that not all problems opened and number of Bank’s reserves do not suffice. If we talk about strategic, public and foreign banks, then they these problems are already solved” — the head of the investment banking operations of the Raiffeisenbank Oleg Gordienko.
Head of corporate-investment unit of a major Bank, who asked about anonymity, notes that in the first place the problems of mask banks are experiencing a shortage of capital. “If the Bank does not have enough capital, it cannot issue new loans (for banks set mandatory norm, according to which the ratio of capital to loans, risk-weighted, shall not be less than 8%. — ). This leads to the fact that the portfolio already granted loans Mature old problems and they have to mask” — he explained.