Page 80 - RusRPTAug23

The decrease in CET1 capital adequacy ratio in May, driven by dividend payments, underscores the importance of striking a balance between rewarding shareholders and maintaining adequate capital levels to safeguard against potential downturns.
The growth in available-for-sale reserves signifies a positive trend in credit portfolios and indicates that banks have been actively engaging in lending activities, particularly in the corporate and mortgage sectors. This bodes well for economic growth and supports businesses and individuals in accessing financing.
While the reduction in the capital buffer may raise questions, it is crucial to interpret it within the broader context of the evolving financial landscape and regulatory environment. Financial institutions continually reassess their capital positions based on risk exposure, market conditions, and regulatory guidelines.
BONDS: The portfolio of debt securities increased by 122bn rubles (+0.6%), mainly due to banks' purchase of new issues of federal loan bonds (OFZ) totaling 135bn rubles. These bonds, particularly the ones with variable coupon income (OFZ-PK), are favored by banks as they reduce interest rate risks.
The emission activity of the Russian Ministry of Finance in June was comparable to that of May, with around 300bn rubles worth of OFZ issued. Apart from banks, there was also demand from Non-State Pension Funds (NPFs), which acquired about one-third of the total issuance volume for their clients (in the framework of trust management).
Companies continue to replace Eurobonds with local debt denominated in dollars and other "toxic" currencies but with the possibility of repayment in rubles. It is estimated that around 40bn rubles worth of such bonds were placed in ruble equivalent in June. Since February 2022, companies have issued replacement bonds totaling around 1.3 trillion rubles in ruble equivalent.
This trend of replacing foreign-denominated debt with ruble-denominated ones is part of a broader effort to reduce exposure to currency risks and align with the current economic conditions. It also allows companies to benefit from the relatively lower borrowing costs in the domestic market.
The increased activity in the debt securities market indicates the ongoing confidence in the stability of the Russian economy and the attractiveness of Russian debt instruments to both domestic and international investors. The demand for OFZ from banks, NPFs, and companies signals the continued appetite for Russian debt, which is seen as a relatively safe and reliable investment option.
8.1.8 Bank news
Austria's Raiffeisen Bank International (RBI) has postponed its exit from
80 RUSSIA Country Report August 2023 www.intellinews.com