Page 16 - Eastern Europe Outlook 2020

• Banks
Russia’s banking sector has recovered from the crisis of 2014-2016 and is back in profit. All the main indicators – capital adequacy ratio (CAR), return on equity (ROE), net interest margins (NIMs), non-performing loans (NLPs) – are at comfortable levels.
The problem the banking sector faces is the sluggish economy and the crisis of confidence that Russian businesspeople are suffering from. This means the population are borrowing too much to maintain their lifestyles whereas the companies are borrowing very little as they prefer to deleverage and sit on what they have, rather than take risks and try and grow further.
The government is trying to do something about this but for the banking sector 2020 will be very similar to 2019. The CBR has worked hard to improve the stability of the banking sector and has proven to be an ultra-conservative regulator. Nothing is expected to change here.
The CBR slapped new prudential limits on consumer lending to cool the market and the liberal fraction is trying to pass investor protection laws to encourage businesspeople to do more business, without much success.
Corporate lending in Russia remained very sluggish in 2019 and will remain so in 2020 as the government grapples with the structural problems.
Russia’s corporate loans nominally increased by RUB204bn (0.5%) in October, but by a higher RUB288bn (0.7%) after adjusting for 1% ruble appreciation against the US dollar. Over 10M19, corporate lending grew about 4% net of exchange-rate effects and excluding January changes from the implementation of IFRS9-like rules.
The retail lending growth decelerated in October, growing by RUB123bn, or 0.7%, compared with RUB256bn (1.5%) in September, after new regulation became effective from October 1, which involves higher risk-weights on loans to leveraged borrowers.
“Retail loans grew by 15% in 10M19, and this may reach 17% for the whole year, while for 2020 we forecast a slight slowdown to about 15%,” Fitch reported.
Banks continue to mainly rely on their customers’ deposits for funding. Deposits (excluding state entities' deposits) nominally increased by RUB109bn (0.2%) in October, but net of currency movements by a higher RUB243bn
16​ EASTERN EUROPE Outlook 2020​ ​ ​www.intellinews.com