Reuters has quoted the First Deputy Chairman of the CBR, Alexey Simanovsky, as saying that he does not expect the current difficulties in the Eurozone to create a crisis similar to that experienced by the Russian banking sector in 2H08, with the regulator ready to support banks and their FX positions being more balanced. He also reiterated the FY12 lending growth forecast at 20-25% YoY, although he admitted that the current situation might create downside risks. The CBR is concerned about FX loans (which account for approximately 4% of retail and for 18% of corporate portfolios) as asset quality might decline due to RUB devaluation.
Deputy Chairman of the CBR Mikhail Sukhov also said that eight large banks might require additional capital in 2H12 as their lending growth outperformed profitability. However, he did not name them.
We are comfortable with the consensus forecast for FY12 lending growth of 20% YoY (vs. 28.2% YoY expansion in April). Meanwhile, we also see downside risks from RUB devaluation and the expected increase in CPI in 2H12 as they might negatively affect demand. We do not expect any sharp deterioration in asset quality, but rather see a gradual increase in NPLs. However, we expect this to keep banks’ CoR at a high level and put further pressure on earnings.