S&P sees up to 38% of Russia bank loans problematic by end-2011

By bne IntelliNews June 29, 2009

Simon Nellis of Citibank -

According to Standard & Poor's, "troubled assets" of Russian banks could total $213bn and banks may have to write off as much as 14% of all loans, or $80bn, over the next 2 1/2 years as companies struggle to repay debt, Bloomberg reported.

S&P plans to review the rating of Russian banks in the coming weeks. The ratings agency has already downgraded Russia's Raiffeisenbank, Unicredit Bank, Promsvyazbank and Bank Uralsib, and put on negative watch seven more Russian banks, including Alfa Bank and Gazprombank.

S&P's forecast on asset quality is the most pessimistic so far. In the report on the banking sector prospects, the agency forecasts bad debt including restructured loans to reach 35-50% by the year-end in a base case, and to surge to 60% in a "catastrophic" scenario that could be triggered by defaults of several large borrowers and continuing recession in the economy. According to S&P, the true level of bad debt stands at 15-20% compared with the CBR number of 4.2% as of May 1.

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