CJSC UniCredit Bank

Commercial bank. Shareholders: Unicredit Bank Austria (100%). Financial indicators (as of October 1, 2012, Interfax-CEA data): assets – 758.8 billion rubles (8th place among Russian banks), equity capital – 97.2 billion rubles, retained earnings – 15.1 billion rubles.

Summing up the results of 2012, bankers, frankly speaking, have no reason to complain. If we look at the main indicators that characterize the dynamics of the development of the Russian banking sector, many representatives of Western countries could only envy such results. The loan portfolio is growing by 17% per year, and assets are increasing in approximately the same proportion. Of course, before the 2008 crisis, the domestic system showed growth of 40% and 50%, sometimes even 60% per year for certain indicators, and for retail lending, the growth rates were 80% and more. Naturally, there will not be pre-crisis rates, but even 15-20% are quite decent indicators by world standards.

The profit in the banking sector as a whole is also very decent. It must be admitted that it is concentrated mainly in large banks with state participation (about two thirds of the total profit of the entire banking system). But these are nuances. Assets are growing, capital in the banking sector is growing. So if you see the overall picture, then at first glance everything is more or less fine.

On the other hand, if we look at the current situation with an armed eye, we will see that the growth of assets and the growth of the loan portfolio in the banking sector is largely due to the funds of the Ministry of Finance and the Central Bank of Russia. That is, the banking system is “not walking on its own”, but, let’s say, on someone else’s – borrowed – money. And the volumes of funding provided by the Central Bank and the Ministry of Finance are also beginning to raise alarm. The growth has been more than twofold since the beginning of the year. Now the volume of funding provided by the state has exceeded the 3 trillion ruble mark, which is already approaching the crisis level (in 2009, the volume of funding was 3.6 trillion rubles). Of course, if we compare the volumes of funding provided with the assets of the banking system, we will get, in principle, a fairly lenient figure of 5–6%. And yet the question is brewing – how much more can the Ministry of Finance and the Central Bank of the Russian Federation allocate funds to support the system. Thus, the situation with funding sources and liquidity in the Russian banking system looks very ambiguous. There is no alternative yet, since funding from abroad has significantly decreased and is now available mainly only to large banks (primarily with state participation). The reality is that there are practically no sources for growth of the banking system.

The situation with capital is quite interesting. If during the crisis bank owners invested more in the form of increasing the capital of credit institutions than they received dividends, now the picture has changed to the opposite. Over the past five years, owners have withdrawn approximately 28% of the banking sector's profit in the form of dividends. And this is generally natural: people are hungry for money. They want to get something from their business, and no one should be blamed for this. But the capital adequacy of credit institutions is falling. From 18% of the capital adequacy level at the beginning of the year, it fell to almost 13%. 5 percentage points is a huge figure. 13% is a historically record low, somewhere since 1998. This is due to many circumstances. Firstly, risk-weighted assets are growing much faster than capital, due to the fact that our portfolio is growing so rapidly. Secondly, the Central Bank is gradually tightening requirements, acting quite reasonably: Russia has undertaken to comply with a number of Basel III requirements. We have been discussing new capital requirements for several years now. Last year, in 2011, we calculated that capital adequacy would decrease by about 4 percentage points. The regulator claimed that it would be 0.3–0.5 percentage points. At the moment, it turns out that the measures that the Central Bank took cost about 1.6 percentage points. Overall, capital adequacy has decreased by 4.8%. But there is no light at the end of the tunnel yet, because we are still facing new tightening of the regulatory system. This means that the level of capital adequacy will most likely continue to tend to decrease. And how can we replenish capital if not all bank owners have the resources to invest, and perhaps not all of them have the desire to do so? In addition, to be honest, not everyone has real capital. There are certain credit institutions that have it drawn up using special schemes.

I have only outlined two problems. Liquidity, which is currently funded by the Central Bank and the Ministry of Finance, and capital adequacy. And there are many other problems. The main one is the accumulation of credit risks. Because this unrestrained consumer lending at 60% growth - on the one hand, and on the other hand - effective rates sometimes reach the same 40, 50 and 60%, and borrowers will be able to pay off such loans with difficulty. All this creates excellent opportunities for the emergence of local crises. Even without an external shock. That is, even if the situation in Europe is not as dramatic as many people imagine, and everything is fine in the USA, we ourselves are not insured that we will not slip on level ground. Because the overheating of the loan portfolio, the overheating of the growth of assets of the banking system - it is, in principle, obvious. It seems to me that it is time to somehow begin the process of braking.

Those who observe the situation will note that a certain element of slowdown is currently taking place: in recent months, both assets and loan portfolios have been growing at a slightly slower rate than they did at the beginning of the year or last year. Will we have a local crisis, even without external shocks, or not? There are studies that allow us to track the indices of the probability that unfavorable events will occur in the banking system over a 12-month horizon. And these indicators are one of the factors that make us think. According to the results of the third quarter, according to these studies, the probability of negative processes in the next one year is slightly more than 50%. It is easy to predict that these risks may be realized primarily in the area of unsecured consumer lending. This is how I see it. I know that many colleagues do not agree with this. There is a point of view that during the 2008 crisis, it was precisely the credit institutions that were not directly involved in consumer lending that experienced difficulties. But, on the other hand, in an unfavorable scenario, the intervention of regulatory authorities will definitely be required. This will be, we hope, not such a serious situation as in 2008, but still, such a scenario cannot be completely ruled out. If the measures that the Bank of Russia is taking to cool down the rather rapid growth rates work and banks take a more cautious approach to risk management issues, then perhaps the banking system as a whole will pass this fork in the road quite safely. We will continue to develop, although probably not at such a high rate, not 20-25% per year, but at least we will maintain the dynamics in the region of 10-15%, I think that this will be quite normal for the banking system.

Banks: We may be at a fork in the road