The Russian banking system is the least reliable among the BRICS countries, according to the international rating agency Moody's. Russian banks are characterized by weak indicators of the quality of the loan portfolio, liquidity and profitability. However, there is hope for improvement - positive dynamics have already been outlined, experts point out that Russian banks are gradually recovering their ability to generate profits, and contributions to reserves are decreasing.
Moody's on Monday published a report comparing the banking systems of the BRICS countries. At the end of 2017, the agency named the Chinese with a baa2 credit rating (investment rating) the most reliable banking system among Brazil, Russia, India, China and South Africa. The Russian banking system was in last place "because of the relatively low indicators of asset quality, liquidity and profitability." The weighted average credit rating of the Russian banking system turned out to be four steps lower than the Chinese one - ba3 (“garbage” rating).
Moody's made its assessment taking into account macroeconomic indicators. The agency predicts that by 2019, real GDP growth in Russia will be the lowest among the BRICS countries (about 1.5–2%). Moody's also notes the risk of US sanctions, which, depending on their severity, may make it harder for state banks to attract funding.
Russian banks have the highest share of problem loans in the loan portfolio (11.8%), even though the quality of their assets has slightly improved against the background of a significant increase in reserves. A comparable indicator of problem loans have banks in India (about 11%). The smallest share is in the Chinese banking system (1.5%).
In terms of capital adequacy, Russian banks ranked 4th. The average sector-wide ratio of basic capital to risk-weighted assets was about 9% at the end of 2017. Only Indian banks lost to them - 8.7%. South Africa banks have the highest capital adequacy ratio - 12.4%. At the same time, Moody's explained that the capitalization of Russian banks in 2017 has improved since "the state saved the big banks." In 2017, the Central Bank announced the reorganization of Binbank, Otkritie and Promsvyazbank, but only Otkritie was capitalized, almost by half a trillion rubles.
The most profitable turned out to be South African and Brazilian banks (the ratio of net profit to assets of more than 2%). Russia on this indicator in the penultimate place (about 0.4%), Indian banks were in last place. The net interest margin of the Russian banks is high (about 4.5%), but the problem lies in the “eating up” the reserves. However, the ability of the Russian banking system to generate profits is restored, and deductions to reserves are reduced, which gives hope for future profit growth, said Moody's.
Low indicators of the Russian banking system compared to other BRICS countries are explicable, experts say. “The countries of this group are recent transition economies, and some of them - Russia, Brazil and South Africa - are also small open economies with not the highest diversification by industry,” explains Ivan RA Uklein, junior director of banking ratings, Expert RA. Therefore, in his opinion, it is not surprising that after the global crisis of 2008–2009 and the local crises of developing countries of 2014–2015, the share of overdue loans of at least one day for Russia and India turned out to be above 10%. “Even the banks of Italy and Spain have this figure above 10% for many years, but they often show acceptable operational efficiency,” says Mr. Uklein.