Potential financial problems of the Russian banking system amount to RUR 4 tln. Without government’s assistance, only half of those can be sorted out, Fitch Ratings’ report says.
The ‘problem figure’ is made of bad loans, i.e. those with repayments overdue for over three months. Russia’s 20 major lenders now have bad loans totaling RUR 4.1 tln ($61.5 bln). This year, Russian banks are to introduce IFRS 9 standards which envisage that bad loans reserves are accrued over the entire loan maturity term.
A sizeable share of those toxic loans (RUR 0.65 tln) is with the government owned VEB. Most of the problematic loans relate to Ukraine.
The agency’s analysts believe that Russian banks will need government assistance of about RUR 2 tln (which is half of the aggregate) to cope with the challenge.
Fitch estimates the costs of cleaning up the banking sector (i.e. getting rid of insolvent banks) at RUR 550 bln ($8.2 bln).
“The estimate appears quite reasonable. The question is, how long will the cleaning up process take”, Sergei Khestanov, assistant professor at Equity Markets and Financial Engineering chair, Department of Finance and Banking at the Russian Presidential Academy of National Economy and Public Administration, notes.