Page 71 - RUSRptApr17

8.1.5 NIMs & CARs
In March, the average maximum deposit rate for the top ten deposit taking banks declined 5.5bp m/m and 176bp y/y to 8.02% or the level fixed in September 2011. There is limited potential for a further decline in the cost of funding for banks, although potential key rate cuts are likely to push deposit rates further down. Therefore, in the longer term the pressure on NIM is likely to grow from declining asset yields.
Banks sampled by Fitch had average capital ratios that were stable in February as moderate lending growth was compensated by profits and reduced volume of FX risk-weighted assets thanks to ruble appreciation. The average total capital ratio was 13.6% (required minimum, excluding buffers: 8%), the Tier 1 ratio 9.5% (6%) and the Core Tier 1 9.2% (4.5%). CBR increased the capital buffer requirements beginning 2017 and systemically important banks now need to comply with a core Tier 1 ratio of 6.1%, a Tier 1 ratio of 7.6% and a total ratio of 9.6%, while other banks requirements are 5.75%, 7.5% and 9.25%, respectively.
All 10 systemically important banks complied with the capital ratios
including the revised buffers, although two of them, Gazprombank and Promsvyazbank, have only moderate Tier 1 cushions, with ratios of 8% and 7.8% at end-February. Gazprombank should improve its Tier 1 ratio by about 200bp once its 2016 profit has been audited (this is currently treated as Tier 2 capital) and by a further 150bp-200bp when it receives RUB85bn of new capital from Gazprom in 1H17.
Eleven of the non-systemically important sample banks had capital ratios above the minimum capital requirements , but did not meet the regulatory buffers, although this does not represent a regulatory breach as compliance with buffers is required only at the end of each quarter. These are Globex, VTB24, Ak Bars, Metcombank, Rencredit, UBRIR, Moscow Industrial Bank, Orient Express, Asian Pacific, Uraltrasbank and International Financial Club. Inability to meet buffer requirements could lead to limitations on dividend payments, but would not represent grounds for a licence withdrawal. However, Fitch believes that in some cases the CBR could discuss potential measures to strengthen capital with bank owners.
Fitch estimates that at end-2M17 the capital buffers (excluding potential future profits) of 31 of the sampled banks (excluding failed and rescued banks, and those not reporting capital ratios) were sufficient to absorb potential losses
71 RUSSIA Country Report April 2017 www.intellinews.com