State increases retail deposit insurance limit
The government will increase the retail deposit insurance limit to RUB 1mn from RUB 700,000, as previously discussed; however, there could be additional terms for the insurance (including franchise payments) to help avoid concentrating deposits at high risk banks. Suggestions for relevant additional terms are to be presented to the government for discussion shortly. Meantime, the CBR will increase the provisioning rate for unsecured retail loans (not overdue and overdue for up to 30 days) to 2-6% from 1-3%. The regulator will also increase provisioning for loans overdue for more than 365 days to 100% (from 75%), as previously discussed. The change will come into effect on March 2013 and will be applied to loans issued from 1 January 2013.
The increase in the retail deposit insurance limit has been discussed before and has been opposed by the large banks, which see pressure from consumer lending banks that fund their robust (40%+ YoY) expansion by offering high deposit rates. We reiterate our view that management guidance for a NIM increase in 2H12 is too upbeat, posing downside risk to 2013F assumptions. For details, see our Russian Banks - Deposit insurance sum up, NIMs down, published 27 September 2012
Mikhail Shlemov, Svetlana Aslanova
VTB Capital analyst
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