S&P sees risks of several Russian banks’ downgrade in 2017

MOSCOW, Mar 29 (PRIME) -- International rating agency S&P does not rule out that ratings of several Russian banks will be downgraded in 2017, Sergei Voronenko, director of the financial institutions department at the agency, told reporters on Wednesday.

The long-term ratings of 15 out of 28 Russian banks covered by S&P have a negative outlook or are on the CreditWatch list with negative expectations.

Voronenko said: “There are banks for which we still see risks connected with a possible reduction of their solvency and rating decrease.”

An unexpectedly strong deterioration of capitalization amid weaker revenue generating capacity and insufficient support of shareholders was named as one of the key reasons which make downgrade possible. The second one is asset quality deterioration and the third one is deterioration of liquidity and funding in smaller banks due to a rise in resource base diversification and reduction of client trust, he said.

S&P does not rule out that the rating outlook for some banks can be changed to stable, but few will manage to meet the criteria, he said.

The agency said in a report that the number of Russian banks is expected to continue to decrease in the next three to five years.

Voronenko said that while large banks will be extending business, smaller ones will be getting more vulnerable. “This will be quite painful foe some banks. There is a group of banks which could adapt to changing conditions of the operating environment but many banks are still on the crossroads of choice of the business model and adaptation to conditions in which they will have to live. Withstanding this tough competition will be the key challenge for the banking sector, I think.”

The market share of the top-10 banks has grown to 70% from 55% in 2008. The banking system is expected to become increasingly concentrated, he said.

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