Latest news with #AndreiMelashchenko
Reuters
24-07-2025
- Business
- Reuters
Russian rate cuts to ease banks' concerns over rising bad debt
MOSCOW, July 24 (Reuters) - After recording record profits thanks to robust demand for loans even at sky-high interest rates, Russian banks are now hoping a cycle of rate cuts will nip concerns about rising overdue consumer debt in the bud. Analysts polled by Reuters expect the Bank of Russia to slash borrowing costs by 200 basis points to 18% when it meets on Friday in what would be its deepest cut since 2022, as an easing cycle after nearly two years of monetary tightening gathers pace. With such high rates, credit risk is currently the main concern among banks, Renaissance Capital economist Andrei Melashchenko told Reuters, something that a mere 1% cut would not fundamentally change. "But if the (easing) cycle towards the end of the year we will see lower spending on reserves by banks," Melashchenko said. "And as the growth of the loan portfolio recovers, the share of problem debt will decrease." Russian banks' combined profits of 1.7 trillion roubles in the first half of this year have enabled them to build up capital reserves as loan servicing has deteriorated with the central bank holding its key rate steady at a more than 20-year high of 21% from October to June. State-owned VTB Bank ( opens new tab told Reuters this month that every 1% interest rate cut gave it an extra 20 billion roubles in profit. CFO Dmitry Pyanov said VTB stands to benefit above all others because its high proportion of loans at floating rates carries greater risks of defaults and debt restructurings. "What can undermine a bank's financial sustainability?" Pyanov said. "It is the default of corporate clients, because problematic retail will hardly cause significant harm." Overdue consumer loans are nevertheless on the rise, even as rates have eased, although Central Bank Governor Elvira Nabiullina has sought to quash rumours of a looming crisis and said all bad debt is provisioned for. A source close to the central bank told Reuters that a rate cut will boost banks' profits and strengthen the sector's capital position. German Gref, CEO of Russia's largest lender Sberbank ( opens new tab drew attention to the growth of overdue consumer loans earlier this month but said everything was covered by reserves. Sberbank is majority-owned by the Russian state and its shareholders, most of whom are in Russia and cut off from Western capital since the imposition of sanctions over the conflict in Ukraine, last month approved a record $10 billion dividend payout. Some of Russia's major lenders slumped to sanctions-induced losses in 2022, but with limited foreign competition and helped by two years of economic growth fuelled by defence spending, Russian banks reported record profits in both 2023 and 2024. Bad consumer debt now accounts for 4.5% of banks' overall retail loan portfolio, the central bank said in a review last week, up from 3.7% in December, since which time consumer deposit rates have been falling. "Russian banks are managing to maintain margins, despite a noticeable increase in provisioning due to the deteriorating quality of the retail portfolio," the central bank said. "We see, indeed, that bad debts are gradually increasing," Melashchenko said. "But for now, we still believe these values are controllable." Analysts also expect any outflow of depositors' funds to the stock market to cause limited harm as the central bank has promised a smooth reduction in rates. As bad debts have grown, the central bank has raised macroprudential limits, forcing banks to increase reserves to cover possible credit risks. Well-capitalised banks can expand their loan portfolios as credit risks decrease, said Melashchenko, while others are reducing lending rates and rebalancing assets towards less capital-intensive ones to build up a capital cushion. The growing accumulation of bad debt is unlikely to bring down any major banks, Olga Naidenova, senior analyst at Sinara Investment Bank, told Reuters. "Even if we look at systemically important banks, I think there is no chance that the state will allow them to default or anything like that," said Naidenova. "They will find a way to support or recapitalise them."
Zawya
06-03-2025
- Business
- Zawya
Russian rouble moves towards 89 vs dollar as market follows geopolitical news
The Russian rouble made a renewed attempt to push towards the 89 mark against the U.S. dollar on Thursday, continuing to trade in a relatively narrow band as traders closely follow geopolitical developments. The rouble is up against the dollar this year, mostly thanks to expectations of improved relations between Moscow and Washington that could produce some kind of conflict resolution in Ukraine and a possible easing of sanctions against Russia. By 0950 GMT, the rouble was up 1.2% at 89.30 to the dollar in over-the-counter market trade. Morning gains have evaporated in every session this week and the rouble has depreciated for six sessions in a row since reaching a more than six-month high in late February. Against the yuan, the most traded foreign currency in Russia, the rouble was down around 0.6% to 12.30. Without accounting for changes in the geopolitical situation, the rouble's fair value against the dollar remains close to triple digits, Renaissance Capital analysts Oleg Kuzmin and Andrei Melashchenko said in a note. "The potential for a stronger exchange rate forming depends on the degree of improvement in the situation with geopolitics and sanctions," they said. Any geopolitical positivity can cause the rouble to rise by another 5%-10%, said Dmitry Polevoy, head of investment at Astra Asset Management, expecting the rouble to return to the 95-100 range in the second half of the year. Brent crude oil, a global benchmark for Russia's main export, was up 0.4% at $69.59 a barrel, after falling to the lowest since late 2021 in the previous session. (Reporting by Alexander Marrow; Editing by Alison Williams)
