Page 61 - RusRPTSept20

estimated that 2Q20 saw a 9.5-10% GDP contraction.
RBC business portal reminds that a comparable drop in net profit was seen in 2017 during the massive banking sector clean-up waged by the CBR.
As reported by bne IntelliNews, Russia's largest banks are coping better with the coronavirus (COVID-19) crisis as they are supported by state-discounted mortgage issuance and are less reliant on consumer credit requirements.
In June the number of profitable banks in Russia stood at 245, or 63% of the total bank count, down by 9 percentage points. Profitable banks account for 67% of all banking sector assets.
The CBR believes that the sector is unlikely to deteriorate considerably in 3Q20 and 4Q20, all things being equal and the COVID-19 pandemic not worsening. Analysts surveyed by RBC believe that banking profits would indeed recover, but that would require a revival of consumer activity, which in turn will be held back by a drop in incomes.
The CBR has extended more support for banks with measures that should help both borrowers and banks to overcome current challenges posed by uncertainty over 2H20.
The CBR announced new coronavirus (COVID-19) relief support measures as a second wave of the pandemic looms.
The CBR has extended some existing support measures and introduced new countercyclical support measures that include an extension of restructurings for those clients most affected by COVID-19 until December 31, yet banks may form provisions relative to such restructuring until July 1, 2021.
A macro-prudential buffer, PTI calculation in relation to loans to borrowers mostly affected by COVID-19 may not be used after December 31, 2019.
Given the current pressure on personal income, the CBR lowered risk weightings for unsecured loans by 30-50ppt, depending on the level of full cost of credit (PSK) and PTI level from September 1, 2020.
However, risk weightings for the highest risk categories (with PSK from 30%) were left unchanged to discourage higher risk lending.
Additional risk weightings for unsecured loans issued before August 31, 2019 are also abandoned, which may release up to RUB168bn ($2.3bn) of capital for the sector.
Given some improvement in liquidity of banking sector and situation on financial markets, the CBR has stopped some measures – a reduction in N26 (N27) liquidity ratio not considered as violation, use of exchange rate as of 1 March 2020 for required ratio calculations.
61 RUSSIA Country Report September 2020 www.intellinews.com