Page 26 - bne_Magazine_September_2017

26 I Cover story bne September 2017
Health of bank sector
bne IntelliNews
The near collapse of leading commercial bank Financial Corporate Otkritie has raised a wider question: is Russia is fac- ing another banking crisis?
Tensions are high and soaring repo deal volume in August, where banks trading bonds for short-term cash loans from the CBR, clearly shows that banks are building up war- chests to deal with potential runs on accounts – just in case. But just how sound is the Russian banking sector?
The short answer is – a lot better than it was just year or two ago. Russia’s bank- ing sector has just gone through two of the worst years since the end of the 90s – worse even than the 2008 crisis year.
In 2015 and 2016 the sector produced no profit at all, other than state- owned retail giant Sberbank, which always does well in times of crisis thanks to the explicit state guaran- tee on all its deposits – the only bank in Russia to enjoy this privilege.
In 2015 the entire sector made only RUB191bn in profits, and all of that was earned by Sberbank alone. In 2016
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things improved with the sector earn- ing RUB944bn and this year banks will easily beat last year’s result. Sberbank still earns the lion’s share, but that share has fallen to about 65% of the total as other banks begin to recover.
The worst of a banking crisis seems to be past. In the first half of this year banks posted record pre-tax profit
of RUB770bn. And the pace is pick- ing up: in July, banks posted pre-tax profit of RUB 157bn – the second- highest profit during the year after RUB 215bn posted in April 2017.
Russian bank profit vs ROEA
The recovery is being lead by the pow- erful state-owned giants, which after the take over of Otkritie by the CBR now account for some 64% of total bank assets, according to expert assessments.
VTB group significantly outperformed the sector, earning RUB60bn in July, of which the parent bank accounted for RUB49bn (ROAE of 44%). This was followed by Sberbank with RUB56bn (22%), but Sberbank had a stellar second quarter and significantly beat expectations with RUB185bn of net income up 27.6% y/y. That implies an
Banks: profit/earnings before tax (LC bn) Banks: ROAE (%)
profit RUB bn
ROAE (%)