Fitch: Near-term prospects improving for Russian retail banks

MOSCOW, Feb 13 (PRIME) -- The near-term prospects for the retail business of Russian banks are improving as loan impairments and funding rates will continue to reduce in 2017, international rating agency Fitch said in a statement on Monday.

“Most loans issued from 2010 to 2013, when rapid growth in lending amid intense competition led to severe deterioration of asset quality and a sharp increase in credit losses, have been repaid or written off. Portfolios now mainly comprise loans of better quality, issued under stricter approval criteria from 2014,” the agency said.

The agency completed an analysis of four banks focused on non-secured consumer lending, Tinkoff Bank, OTP Bank, Home Credit & Finance Bank (HCF Bank) and Orient Express Bank, and found out that the ratio of average credit losses, which are calculated as the increase in loans overdue by more than 90 days plus write-offs, divided by average performing loans, fell to 11% in January–September 2016 from 19% in 2015.

The agency expects credit losses of the banks to fall to less than 10% in 2017, while the return on average equity (ROAE) is expected to remain on the level of 2016, of 15–20% of OTP Bank and HCF Bank and about 40% of Tinkoff, in 2017. Orient Express Bank is expected to have a lossless retail business in 2016, and the 2017 results will depend on a merger with Uniastrum Bank.

A decline of Russians’ real disposable income poses a threat to asset quality in retail lending, while stricter rules have already influenced interest rates and boosted the coefficients of risk, Fitch said.

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