Page 17 - Eastern Europe Outlook 2020

(0.4%), Fitch reported. Over 10M19, customer funding grew by RUB1.3 trillion (2.5%) adjusted for exchange-rate effects (corporate decreased by 1.1%; retail increased by 5.9%).
Funding from state entities increased by RUB109bn, or 1%, in October and by RUB2.7 trillion (33%) from the beginning of the year, reaching RUB8.6 trillion (excluding the CBR RUB0.5 trillion subordinated debt provided to Sberbank and RUB1.8 trillion of deposits at the CBR-owned bad bank) or 11% of sector liabilities at end-October.
Foreign currency liquidity was sound with liquid foreign currency assets estimated at about 45% of foreign currency customer accounts at end-October.
Ruble interest rates decreased by 35-45bp in October judging by Mosprime rates for one week to six months, which was due to generally healthy liquidity and the CBR's key rate cuts of 25bp in September and a further 50bp to 6.5% in late October followed by a final cut of 25bp in December.
“Although interest rates are declining, we do not expect significant margin pressure in the near term, as loan and deposit rates are largely falling in tandem and the share of higher-margin retail business is gradually increasing,” Fitch said.
The sector reported a RUB173bn net profit in October (annualised return on average equity (ROAE) of 23%), while excluding the result of the 'bad bank' (which has negative equity of RUB1.5 trillion) it was RUB166bn (19%). Sberbank earned RUB74bn in October (annualised ROAE of 21%) and accounted for 45% of the entire sector profit.
Sector average capital ratios were roughly stable in October, as lending growth was compensated by monthly profits. The sector average core Tier 1 ratio was 10.1%, Tier 1 ratio 10.7% and total capital ratio 13.9%, all excluding the CBR-managed bad bank.
17​ EASTERN EUROPE Outlook 2020​ ​ ​www.intellinews.com