Banks Addicted to State Support

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NRA Analyst Egor Ivanov

11 months of 2015: bad economy does not allow banking sector to get out of crisis.

The rate of reduction of the banking system increased to 12% in 2015. Following 11 months of last year, the real growth of bank assets is negative (lagged behind inflation), of capital – about zero, largely due to government support. Bank profit is still ‘eaten’ by the creation of reserves for bad loans.

Market participants

In 2015, the Bank of Russia revoked 93 licenses. A record month for revocations turned out to be November, when 17 banks lost their licenses. Last year were revoked licenses of 6 more banks than in 2014, but the base has also decreased. As a result, the rate of reduction of the banking sector has grown significantly: from 8.9% to 11.9% over the year. The Head of Sberbank, Herman Gref, suggested that in 2016 another 10% of Russian banks will lose their licenses.

Among major banks that lost a license in 2015, may be noted the banks from the group of Anatoly Motylev (Russian Credit, M Bank, AMB Bank, Tula Industrialist) – the total volume of assets amounted to over 450 billion rubles, and the volume of attracted funds of the population – about 70 billion rubles; Probusinessbank, with assets over 270 billion rubles and public funds of about 27 billion rubles; Transportny, with assets of about 100 billion rubles and public funds in the amount of 39 billion rubles.

As a result of the withdrawal of licenses, Russian banking system lost 1.9 trillion rubles of assets and more than 90 billion rubles of bank capital (although one can argue about the realness of that capital). The total amount of funds placed in deposits and accounts of individuals and individual entrepreneurs in banks with revoked licenses amounted to about 450 billion rubles. That is much more than the capital of Deposit Insurance Agency (DIA).

Among the reasons, which have become the basis for the revocation of license, in 37% of cases (34 banks) was non-compliance by credit institutions with the requirements of Bank of Russia's regulations issued in accordance with the Federal Law ‘On Counteraction to Legalization (Laundering) of Proceeds From Crime and Financing of Terrorism’. In 2014, 36 banks have lost their licenses because of this. The remaining cases were of economic reasons (loss of liquidity and capital, falsified statements).

In 2015 no new banks were registered, 9 banks were reorganized (mostly by attaching to other banks), 2 banks announced the termination of their activities. Two non-banking organizations were registered: Center for International Settlements NGO (3531-K, 28/04/2015) and Perspective NGO (3532-K, 11/06/2015).

Assets of the banking sector

Overall, banking sector's assets grew by only 1.8% (1.4 trillion rubles) over the 11 months of 2015, compared with 23.9% for the same period last year. The negative contribution to the dynamics of assets in 2015 made credit institutions with revoked licenses.

Among the leaders of growth can be noted Moscow Credit Bank OJSC (+515.6 billion rubles), VTB Bank PJSC (+485.6 billion rubles), FC Opening Bank PJSC (+380.7 billion rubles), Rosselkhozbank JSC (+364.9 billion rubles), Binbank PJSC (+316.1 billion rubles). Among banks that are leaders in terms of assets reduction (excluding credit institutions, which are in the process of readjustment) can be named Khanty-Mansiysk Bank Otkritie PJSC (-273.7 billion rubles), Alfa Bank JSC (-163.5 billion rubles), Rosbank PJSC (-101.2 billion rubles).

In relative terms, among the leaders traditionally are small credit institutions, whose multiple growth is due to low-base effect. Among the leaders of medium and large banks can be called Sovcombank PJSC (+127.3%), Yugra Bank PJSC (+90.4%), Moscow Credit Bank OJSC (+86.0%), Binbank PJSC (+76.4%). Banks that have demonstrated the greatest relative reduction in assets: Zhilstroibank CB OJSC (-78.2%) and National Savings Bank CJSC (-66.5%). The leaders of anti-rating among medium and major banks are Metallinvestbank PJSC JSCB (-46.7%), HSBC Bank (RR) LLC (-43.5%), Natixis Bank JSC (-42.9%), Khanty-Mansiysk Bank Otkritie PJSC (-34.7%).

The capital of the banking sector in 2015 demonstrates higher dynamics, about the rate of inflation: for 10 months of 2015 it grew by 895.1 billion rubles (+11.3%), up to 8.823,5 billion rubles. This is largely due to the current program of increase of banks capitalization, launched in early 2015.

Among the leaders in absolute numbers traditionally are featured the largest banks: Sberbank PJSC (+361.9 billion rubles), VTB Bank PJSC (+270.3 billion rubles), Rosselkhozbank JSC (+153.3 billion rubles), Gazprombank JSC (+134.4 billion rubles). Among the outsiders, in addition to the banks under readjustment, may be noted Khanty-Mansiysk Bank Otkritie PJSC (-17.5 billion rubles), Home Credit and Finance Bank LLC (-12.4 billion rubles), MTS Bank PJSC (-8.8 billion rubles). Also worth noting is that some banks stopped disclosing their statements, so the outsiders list may be broader.

In relative terms, among the leaders are RNCB Bank PJSC (+567.9%), Roseximbank JSC (+449.0%), J&T Bank JSC (+397.1%). Among the outsiders on the relative changes in capital may be named Baltinvestbank PJSC (-62.0%), MTS Bank PJSC (-30.3%), Vostochny CB PJSC (-23.4%), Khanty-Mansiysk Bank Otkritie PJSC (-23.3%), Home Credit and Finance Bank LLC (-18.9%).

Profit

The banking sector's profit for the 11 months of 2015 amounted to 264.6 billion rubles. More than 3/4 of it is of Sberbank. The number of unprofitable credit institutions amounted to 211, with 4 credit institutions have not given financial statements. The cumulative loss of banks with a negative financial result amounted to 393.7 billion rubles. The main pressure on the financial results continue to provide reserves, which for 11 months of 2015 increased by 1119.8 billion rubles, as well as lower interest margin as a result of appreciation of the resource base.

Traditionally, the main income of the banking sector account for the largest credit institutions, and if they show a loss, medium and small banks are simply unable to compensate for them.

Therefore, such a low financial result of the banking sector as a whole is caused by huge losses of major players, such as Bank of Moscow OJSC (-55.4 billion rubles), Rost Bank JSC (-36.2 billion rubles), Rosselkhozbank JSC (-32.9 billion rubles), Gazprombank JSC (-25.7 billion rubles), MDM Bank PJSC (-25.4 billion rubles), Khanty-Mansiysk Bank Otkritie PJSC (-18.3 billion rubles).

Of the banks that have demonstrated the biggest positive financial result may be noted Sberbank PJSC (+202.4 billion rubles), VTB Bank PJSC (+58.2 billion rubles), Alfa Bank JSC (+24.6 billion rubles.).

Profile, 25/01/2016