Natalia Orlova Chief Economist Alfa-Bank. Russian Banks After the Crisis

Transcription

1 Natalia Orlova Chief Economist Alfa-Bank Russian Banks After the Crisis

2 Russia 27: Unaffected by subprime turmoil Assets breakdown US vs. Russia, % of assets Others, 27% US Securities, 2% Others, 3% Russia Securities 11% Russia was not affected by the subprime crisis, as mortgages represented only 5% of banks assets versus 35% in the US Russian mortgage market was a small 1.8% of GDP in 27 Corporate loans, 13% The RTS and Russia s sovereign CDS continued to perform well until mid- 28 Mortgage 35% Consumer loans, 7% Mortgage, 5% Consumer loans, 9% Corporate loans, 45% 3 RTS and Russia s CDS remained unchanged in 27 RTS CDS, bpts 1 9 Mortgages-to-GDP by country 72.% % 5 36% % 2.5% 1.7% 12.% 5 Jan-6 May-6 Sep-6 Feb-7 Jun-7 Nov-7 Mar-8 1 Russia 7 Russia 8 Ukraine Kazakhstan Japan Germany US RTS Russia's 1-year CDS Sources: CBR, Bloomberg, Alfa Research 1

3 Drop in oil prices triggered capital outflow Steel and Urals international prices Russia vs. other equity indexes in 28, % 16 $/bbl $/tonne 12 % Korea Ukraine Poland Turkey Brazil China Argentina India Russia % -2% -3% % -5% -6% -7% -8% -9% -57% -85% -56% -63% -58% -52% -55% -65% -74% 2 2 CBR reserves and capital outflows, $ bln Jan-95 Jun-96 Dec-97 May-99 Nov- May-2 Oct-3 Apr-5 Sep-6 Mar-8 Sep-9 Private capital flows 2 CBR reserves 6 Urals, $/bbl Steel, $/tonne Sudden decline in commodity prices triggered reconsideration of Russia s growth story Russia s RTS market fell 74% in 28, one of the largest drops in the world CBR reserves declined from $597 bln in summer 28 to $427 bln as of the end of 28; 4Q8 capital outflow totaled $131 bln Q7 2Q7 3Q7 4Q7 1Q8 2Q8 3Q8 CBR reserves, $ bln Private сapital flow s, $bln 4Q8 1Q9 2Q Sources: Bloomberg, CBR, Alfa Research 2

4 Banks became vulnerable in 2H Ruble depreciated against the basket and USD Ruble exchange rate came under pressure in 2H8 and fuelled run on deposits 38 Retail deposits became more dollarized 36 7% 7% % 5% 4% Alfa Bank 6% 5% Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Rub/bask Rub/$ 3% 2% 1% Banking sector 4% 3% Retail deposits become more dollarized: the share of foreign-currency deposits jumped from 13% to 33% in 2H8 in the Russian banking system and from 3% to 65% at Alfa Bank % Sep-8 Feb-9 May-9 Aug-9 Retail deposits in foreign-currency, % total, Russia (lhs) Retail deposits in foreign-currency, % total, Alfa-bank (rhs) 2% Sources: Bloomberg, CBR, Alfa Research 3

5 Liquidity crisis successfully resolved % Banking liquidity and overnight rates $ bln Banks foreign debt made up 2% of assets in mid-28 $ bln 21% 19% 17% 15% 13% 13% 1% 7% 6% 23% 18% 13% 8% % May-7 Sep-7 Jan-8 Jun-8 Oct-8 Feb-9 Jul % Liquidity, $ bln Overnight, % Banking debt Companies' debt Banking debt, % of banking assets State money in total banking liabilities went up from 2% at the beginning of 28 to 9% Foreign debt financed around 2% of banks assets until mid-28 $ bln Total state money: Banking sector liabilities, % of total 2Q8 % 4Q8 % 7M9 24 2% % 78 % 9% R bln CBR rate and reserves requirement % CBR Finance Ministry 2 22 % 2% % 1% % 2% Retail deposits % 21 21% 28 24% Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 7 Corporate accounts % % % Obligatory reserves, R bln Refinancing rate Sources: CBR, Reuters, Alfa Research 4

6 1 9 8 Macro trends affected retail loan quality mln people Russia s unemployment rate 1% 9% 8% Unemployment stabilized at 7.6% in September, but wage arrears still pose a serious threat to loan-payment discipline 7 7% Banks retail lending and NPLs* 6 5 6% 5% 44 RUB bln 6.4% 7.% 4 3 4% 3% 5.7% 6.% 6.2% 6.% % 2 2% 5.1% 1 1% 4.7% 5.% Jan-5 Apr-5 Jul-5 Oct-5 Jan-6 Apr-6 Jul-6 Oct-6 Jan-7 Apr-7 Jul-7 Oct-7 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 % % 5.1% Unemployment Unemployment rate (rhs) 3.6% 3.7% 4.% 3.3% 3.4% 3.6% 3.4% Retail loans are down 1% YTD; NPLs were reported at 6.4% of loan books as of September 29, double their level of last summer 35 Jul-8 Aug- 8 Sep- 8 Oct-8 Nov- 8 Dec- 8 Jan- 9 Feb- 9 Mar- 9 Apr-9 May- 9 Retail loans, RUB bln NPLs, % Jun- 9 Jul-9 Aug- 9 Sep- 9 3.% *Figures under RAS Sources: CBR, Rosstat, Alfa Research 5

7 Corporate NPLs jumped from 1.1% to 5.6% Corporate profit has dropped 3 $ bln 1.4 Corporate NPLs* RUB bln 5.7% 6.% % 5.3% 5.6% 5.% % % 4.% -3-4 Net profit Companies' debt due next 12M, $ bln Profit to debt coverage.2 4.% 3.5% 3.% % Decline in asset prices hit local borrowers hard Real sector net profits fell 62% y-o-y in 1H9 ($51 bln vs. $134 bln in 1H8) Corporate profits will cover only 3% of debt payments over the next 12 months Corporate NPLs are a major threat, rising from 1.1% to 5.6% over the last 12 months 2.1% 1.7% 1.4% % 1.1% 1.2% 11 Jul-9 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Corporate loans, RUB bln NPLs, % *Figures under RAS 2.% 1.%.% Sources: CBR, Bloomberg, Rosstat, Alfa Research 6

8 Banks response to the crisis 1% Maturity of corporate loan book YTD increase in loans, deposits and CBR funding 9% 8% 7% 6% 5% 39% 44% 52% 55% 63% 15 1 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 RUB bln, YTD growth 1,16 4% 3% 5 2% 1% % H9 < 6 months 6 months - 1 year > 1 year -5 Banks are rolling over bad loans to avoid losing equity capital Bank s are unable to increase lending exposure, so they are compelled to increase retail and corporate accounts in order to reduce exposure to the CBR Building a position in financial instruments is another way to avoid lending ,439 Retail+corporate deposits Retail+corporate loans CBR loans Sources: CBR, Bloomberg, Alfa Research 7

9 State liquidity helping to keep loan/deposit ratio high 14% 12% 1% 13% Banks foreign debt and loan-to-deposits ratio* 115% 11% 14% 14% Even though Russia s loan-to-deposit ratio declined to 15% in September 29 from 115% in December 28, it is still well above those of the other BRICs, suggesting a lack of local funding Corporate and retail loan book growth, % y-o-y* 8% 8% 8% 8% 75% 73% 12% 6% 1% 8% 4% 6% 2% 4% 2% % UK Russia Poland US Czech China India Brazil Turkey *as of December 28 % -2% M9 After a long period of strong growth, both retail and corporate loans declined in 9M9-4% Corporate lending, % growth Retail lending, % growth *Calculated based on figures in dollar terms Sources: CBR, Reuters, BIS, Alfa Research 8

10 Banking sector consolidation a priority 1% 9% Banking sector concentration in Russia 93% 92% The top 2 banks in Russia control 9-95% of all key banking markets 8% 73% 8% 79% Number of banks at the beginning of the crisis (T) and two years later (T+2)* 7% 66% 6 6% 57% T T % 4% 44% 5 3% 2% % % Top 5 Top 2 Top 5 Top Assets Loans Retail deposits In many countries, a period of economic slowdown has been used to consolidate the banking sector and reduce the number of banks Indonesia Korea Malaysia Thailand Sweden Finland *Data collected for 199s Sources: CBR, IMF, Alfa Research 9

11 Capital injections crucial to boosting growth 8.% 6.% Economic trends stabilized in 2Q9 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 6.9% 12.% Industrial output began to show signs of recovery in June-July, and loan books stabilized Countries financial rescue packages as % GDP 4.% 2.%.% -2.% -.4% -1.5%.5% -1.5% -1.2% -.2%.% 7.% 2.% -3.% 6% 5% % GDP 5% -4.% -8.% 4% 41% -6.% -8.% -16.% -13.2% -13.7% -16.9% -17.1% -12.1% -1.8% -12.6% -13.% 3% -1.% Corporate loans grow th, m-o-m (lhs) -18.% Industrial output grow th, y-o-y (rhs) 2% 46% 35% 23% 22% 18% Russia s entire financial rescue package is only 7% of GDP, well below developed economies In developed economies, capital injections equaled up to 3-6% of GDP; Russia lags behind, with 1% of GDP allocated for direct recapitalization 1% % 2% 19% 16% 7% 6% UK Netherland US Germany France Russia Liquidity, asset purchases, guarantees Capital injection Sources: CBR, Rosstat, BIS, Alfa Research 1