The CBR has published lending rates for March which reveal that spreads for banks continued to widen. As the CBR stats are a clear leading indicator (normally with a one-quarter lead), this hints at margins stabilising in 2Q12. The key highlights are as follows.
Corporate lending rates unexpectedly shot up, the second monthly increase in a row (50bp to 9.8%). While the rates have been volatile during the last four months, on average 1Q12 rates increased 30bp during the last quarter and are up 140bp from historic lows of 3Q11.
On the funding side, rates to term deposits slid 20bp to 7% (the third monthly decrease in a row), as the pricing competition for deposits is easing and rates are currently coming off the peak. Retail customer accounts costs (including current accounts) decreased only 10bp to 6.1%.
While the strong spike in corporate lending rates seems to be an anomaly, we are encouraged by the spreads widening. In our view, this will support the margins in 2H12. As far as the 1Q12 results are concerned (reporting is to start in the second half of May), we expect NIMs to be under pressure of high funding costs, stabilising in 2Q12. Looking into 2H12, we see rates stabilising at current levels with NIM remaining steady from 2Q12 onwards and rates supported by the pick-up in inflation in 2H12.