S&P: Russian banks' operating conditions stabilizing.

By bne IntelliNews May 20, 2010
Russian banks' operating conditions are stabilizing, easing pressure on loan quality, credit costs, and capitalization, Standard & Poor's has said in a report. According to Ekaterina Trofimova, the main author of the report, the growth in problem loans has reached its highest point, liquidity has improved, and prospects are brighter for refinancing. In addition, many banks in Russia have bolstered their loss absorption cushions through provisioning, higher pre-provisioning earnings in 2009 than we anticipated, balance sheet and loan portfolio reduction, and some capital injections, Trofimova said. S&P said it believed the banking industry's rebound had been shaped by Russia's gradual economic recovery. The ratings agency added, however, that the economic recovery was expected to be uneven and Russia would remain vulnerable to setbacks. Loan growth in Russia's banking system is expected to remain constrained at least in the next couple of years, rising about 10% this year, which is much slower than before 2008, S&P said. S&P also said it estimated problem, including restructured, loans at almost 40% of all loans in the system. Cumulative credit losses could reach 8.6% of system-wide loans, or almost USD 45bn, for 2010-2012, S&P said. Meanwhile, asset quality is unlikely to recover for at least a couple of years to pre-2008 levels, according to S&P.

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