Page 70 - RusRPTMar19

wiping out almost all the gains to date that year.
Overall, the 2018 stats highlight the uneven recovery of Russian banks, although risk costs are the key driver of ROE recovery. For 2019, we expect competition to pick up, especially as Otkritie tries to regain market share after the completion of its clean up.
The analysts top picks in the banking sector remain the same. Sberbank remains the investor’s darling and the “tourist stock” held by everyone with even a passing interested in Russia’s equity universe.
The other top pick is Russia’s only purely online bank Tinkoff Bank, which remains an outperformer and one of the few Russian shares that has regained its IPO price valuation since 2008 crisis. The bank is abandoning the traditional concept of a stolid bricks and mortar banking establishment and is trying to create a “lifestyle bank,” the bank told bne IntelliNews in an exclusive interview last year.
The Central Bank of Russia reports that the household credit stock increased during the past two years.
Retail credit growth accelerated substantially last year, lifting the total household credit stock to RUB14.9 trillion ($220bn) at the end of 2018 – an increase of 22% y/y. During Russia’s last credit boom in 2011—2013, annual growth in credit exceeded 30%, Bank of Finland Institute for Economies in Transition (BOFIT) reports.
While the volume of housing loans grew especially fast last year, growth in unsecured consumer credit was also brisk. Credit stock growth was highest in the Moscow region, St. Petersburg and some regions in the Volga Federal District. In all these places, high growth was generated mainly by housing loans. Due to the housing loan growth in recent years, housing loans now constitute 43% of all household borrowing. Less than 1% of household credit is denominated in foreign currencies.
The increase in credit demand partly reflects a slight drop in interest rates. The average rate on a ruble-denominated household loan for more than one year was 12.5% in December. In December 2017, the similar average rate was 13.5%. The corporate credit stock also grew rapidly, but the rate of growth (11% y/y) was well below the growth in household borrowing.
8.1.1 Earnings
The CBR has published its FY18 banking sector statistics. Assets grew 10.4% y/y, supported by a 13.9% expansion of the loan portfolio. Profit increased 70% y/y to RUB 1.3 trillion ($19.8bn), with an implied ROE of 15% vs. 9% in 2017, VTB Capital (VTBC) analyst Svetlana Aslanova said in a note.
“Excluding the effect from banks under sanitisation, profit reached RUB1.9 trillion ($29bn). Sberbank earnings accounted for 60% of sector earnings, down from 83% in 2017,” Aslanova said in a note.
Russia’s banking sector is back in profit and earned RUB264bn ($4bn) in January, according to Central Bank of Russia (CBR) data released on
70 RUSSIA Country Report March 2019 www.intellinews.com