Translated material
Putin's support
The President promised to help Russian banks with money
The growth rate of the Russian banking system is slowing down. This is evidenced by the data of the “Review of the Russian Banking Sector” published yesterday on the Central Bank website. The increase in assets in October was only 0.26%, which was the lowest value since May 2004, when the “crisis of confidence” erupted in the country. Analysts explain this by the negative impact on the domestic banking system of the consequences of the global liquidity crisis. Market participants also attribute the drop in the growth of funds on private deposits to 1.8% in October to this factor. According to the newspaper's interlocutors, pessimistic information about the state of the global financial sector does not at all increase citizens' confidence in the Russian banking sector.However, help was promised to domestic banks yesterday . Russian President Vladimir Putin, at a meeting with VTB President Andrei Kostin, said that the government and the Central Bank will assist in providing liquidity to the Russian banking sector. “I am confident that there will be movement in this direction. The government and the Central Bank are ready to support domestic banks. But this must be done carefully so as not to disrupt macroeconomic stability,” said the head of state.
As you know, to increase liquidity, the state, represented by the Ministry of Finance and development institutions, has already “injected” several hundred billion dollars into the interbank market. And since the fall, the Central Bank has offered banks several financial instruments to solve the problem of shortage of funds.
The total assets of banks in October increased by 0.26%, or by 46.6 billion rubles. -- up to 18 trillion 277.9 billion rubles. October growth rates were the lowest since May 2004, when assets increased by only 0.08% for the month. As a result of the slowdown in the growth of banking assets in the second half of this year, the pace of their increase over ten months was almost equal to the same period last year (30.1 and 29.9%, respectively).
In August and September the growth was 2.8 and 1.5%, while in March this figure reached 7.7%. “The reasons for the slowdown in asset growth are obvious,” says Alfa Bank analyst Natalia Orlova. “Due to the liquidity crisis, the volume of banks attracting external borrowings has sharply decreased, and accordingly this has had a negative impact on the domestic market.” Antanta Capital analyst Maxim Osadchiy shares a similar opinion: “The decline in the growth rate of banking sector assets is associated with the global liquidity crisis. In particular, Russian banks’ access to Western investments has become more difficult.”
The total losses of banks in October of this year increased by 62% - to 1.790 billion from 1.106 billion rubles. on October 1st. According to data published by the Central Bank of the Russian Federation, this is 72% more than for the first ten months of 2006 (RUB 1.043 billion). The newspaper's interlocutors explain the bank losses by saying that credit institutions were selling blocks of securities.
“Increasing stock market volatility has a negative impact on securities portfolios, so banks are reducing their securities portfolios and transferring the released funds to loan portfolios. Thus, as of November 1, the securities portfolio decreased to 11.7% of assets from 13.4 as of October 1, notes Mr. Osadchiy. -- At the same time, loans to banks increased to 73% from 70.8 over the same period. Russian debt securities are being actively squeezed out of banking assets: since the beginning of the year, their share has decreased from 3.8 to 2.6% as of November 1.”
“In the context of the developing global liquidity crisis, the development trends in the Russian banking sector are generally negative,” summarizes Mr. Osadchiy. Ms. Orlova from Alfa Bank gives a similar assessment of the situation: “The slowdown in the growth rate of the banking system will continue until the liquidity situation in the world normalizes.”
However, not all banks have significant problems with financial performance. As VTB CEO Andrei Kostin said yesterday, VTB is finishing 2007 with record figures. “We expect record profits. The bank's assets grew by 60%, the loan portfolio by about 80%,” he said. According to him, this week the bank is celebrating “a kind of record” - the volume of mortgage loans issued to the population through the VTB system has reached $3 billion.
As Mr. Kostin believes, the problem with rising external borrowing costs can be solved through the use of internal resources. According to the head of VTB, this will have a positive impact on the lending system, the banking sector and the Russian economy as a whole.
Unlike banking analysts, Mr. Kostin believes that “the famous mortgage crisis in the American market has nothing to do with Russia.”
“The banking market in the United States and Western Europe is experiencing crisis phenomena; many leading Western banks are suffering losses,” said the head of VTB. “The capitalization of the US banking sector has fallen sharply, and even Citi Bank, the largest bank in the world, has lost almost half in the price of its shares this year.” “Against this background, the Russian banking sector demonstrates enviable resilience and stability,” he said. “In general, everything is bad for them, but everything is good for us,” summed up Vladimir Putin.