Russian banks 'lose' 140 billion rubles
Russian banks' profits declined by 15% to 790 billion rubles, according to the Russian Central Bank.
"The number of profitable credit organizations prevails: 420 credit organizations had reported a profit of 1.6 trillion rubles, 140 credit organizations had reported a loss of 772 billion rubles," the bank said in a statement.
The bank's statistics specifies that after an adequate risk assessment by credit institutions, the amount of the loan loss provision increased by 26.9% in 2017 to 6.9 trillion rubles, including the December increase of 3.9%, Interfax reported.
The regulator explains that a significant increase in the provision was largely due to one-time creation of additional provisions for problem banking assets that undergo rehabilitation under the new mechanism using the funds of the Banking Sector Consolidation Fund.
The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, speaking with Vestnik Kavkaza, noted that the decline in the banks' profits is linked to the increase in reserves. "I think last year the banks increased the number of reserves to a larger extent - the proportion of defaults on loans has continued increasing during the year, while lending itself has not increased as quickly. In addition, the decline in the banks' profits was due to a low return on securities," he explained.
Statistics of the Russian Central Bank, indicating an increase in reserves by 26.9%, confirms this and points to a serious problem of the Russian banking system. "Such a large-scale creation of additional provisions during a year suggests that the system accumulates more risks than it creates opportunities for their compensation through business. This leads to the fact that the banking system is in some kind of conserved form and its actions as a generator of economic growth are poor," Alexander Abramov stressed.
The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, pointed to other probable reasons for a decline in the banks' profits. "In the first place, this trend is linked to the strengthening of the ruble, because in the crisis period a part of the income was received from the currency revaluation. Second, the lack of active economic growth: the ability to lend to growing enterprises was extremely limited, partially because of high interest rates. Third, the increasing regulation, increased demands from the Bank of Russia, which further narrowed the potential for credit growth," he said, adding that the growth of banks' reserves is part of a new, more gesture requirements of the Central Bank.