Moody’s has changed the outlook for the Russian banking sector
The international rating agency Moody’s has become more optimistic regarding the Russian banking sector. The agency’s forecast for the sector has changed from “negative” to “stable”. It has become known from the Moody’s press release. The agency reports that this is due to the fact that recently there have been signals of the Russian economy growth, which is likely to have the positive impact on banks.
According to the forecast, Moody’s analysts believe that the creditworthiness of the Russian financial institutions will be stable in the next 12-18 months.
Vice-president and Senior Credit Officer at Moody’s Irakli Pipia said: “The slow economic recovery and the stabilization of macroeconomic indicators in Russia will improve the operating environment for the banks. In this regard, we expect to improve the profitability of banks and the preservation of their capital.“
In addition, a message from the agency reads: «Moody’s predicts a decline of Russia’s GDP by only 1% in 2016 against the background of the oil prices stabilization, and strong government incentives support the prospects of the economic growth in 2017″.
“Against this background, Russian banks are likely to be profitable in 2016 and will continue to improve indicators in the future. At the same time net interest margins remain below the average levels by historical standards – less than 4% in the first half of 2016 “, – stated Moody’s press release.
In addition, the analysts of the agency noted that the costs for creating reserves for probable loan losses are likely to remain rather big, as banks are forced to improve the coverage indicators of problem assets.
“The asset quality of Russian banks is likely to continue to deteriorate, albeit at a slower pace. Moody’s expects the growth of the share of problem loans in financial institutions to 14-15% of the total loan volume in the next 12-18 months, from 12% at the end of 2015 “, – said the agency.
Moody’s experts also drew attention to the fact that the capitalization of the banking system is being improved via government capital injections. According to the research, the agency concludes that the capitalization of the banking system will reservedly fall during the forecast period.
“The indicators of funding and liquidity in the Russian banking system are improving: at the end of June the average ratio of the volume of loans and deposits decreased to 109% from over 115% a year earlier, and the banks continued to reduce their dependence on the interbank lending market”, – informed the analysts of the agency.