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15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
THE RUSSIAN BANKING SYSTEM
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks’ major indicators (end-period)
14000
12000
10000
Total Assets
8000
Equity
6000
Loans
4000
2000
0
98
99
00
01
02
03
04
05
H1
'06
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Penetration (in % of GDP), end of period
50
45
40
35
30
Total Assets
25
20
Equity
Loans
15
10
5
0
98
99
00
01
02
03
04
05
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Existing banks vs. Liquidated banks (31.08.2006)
1600
1400
1200
1000
800
600
400
200
0
Existing with licence
Liquidated
Subject to liquidation
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
The smallest Russian banks as of 31.12.2005
Name
Registration's place
Equity
T.A.
Licence
as of
1/11
2006
Deposit
insurance
1
Kontinental
Republic of Dagestan
1611
2339
Y
N
2
Magaramkent
Republic of Dagestan
2738
3513
Y
Y
3
Surskkombank
Sursk, Ulyanovsk reg.
1884
4724
Y
Y
4
Karabudakhkentskiy (Kaspiy)
Republic of Dagestan
2808
5283
Y
N
5
Koshehablbank
Republic of Agideya
1080
5723
Y
Y
6
Lend-Bank
St. Petersburg
-47
5984
N
N
7
Derbentinvestbank
Republic of Dagestan
3925
6433
N
N
8
Geobank
Moscow
3414
6796
Y
Y
9
Archekas
Kemerovo reg.
909
8856
N
N
Informbiznesbank
Republic of Dagestan
10812
11022
Y
N
10
3 of these banks were closed during the last 11 months, 7 survived, 4 out of 10
accepted to the deposit insurance system
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks: different licence types
(end of period)
1400
1200
Number of banks with
v alid licence
1000
800
Banks with licence to
attract personal deposits
600
Banks with FX licence
400
Banks with general
licence
200
01
/0
4
03
/0
4
05
/0
4
07
/0
4
09
/0
4
11
/0
4
01
/0
5
11
/0
5
03
/0
6
07
/0
6
0
Even in the ”elite group” there are more than 300 banks
> 850 banks join the deposit insurance system in the first round
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Market share of different groups of banks/1
Total assets
31.07.06
01.01.05
0.2%
9.2%
10,7% 0,3%
Top-5 Banks, incl. Sberbank
Banks 6-20
15,7%
45,1%
44.5%
Banks 21-50
Banks 51-200
Banks 201-1000
11,7%
15.3%
11.6%
Banks 100116,5%
19.2%
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Market share of different groups of banks/1
01.01.05
31.07.06
Capital
0,8%
14.8%
18,2%
32,4%
0.6%
Top5 Banks
35.6%
Banks 6-20
Banks 21-50
20,1%
18.5%
Banks 51-200
Banks 201-1000
12,6%
15,9%
Total 1001-
11.5%
19.0%
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Market share of different groups in total number of banks/1
(classified by authorised capital)
31.12.2005
31.12.2004
18.0%
5.6%
Group1: less than 3 M RUR
10.2%
19.4%
Group2: 3-10 M RUR
4.5%
8.5%
Group3: 10-30 M RUR
16.5%
Group4: 30-60 M RUR
17.9%
14.7%
Group5: 60-150 M RUR
16.3%
Group6: 150-300 M RUR
Group7: ov er 300 M RUR
16.2%
Total:1,229
17.3%
16.9%
3.7%
18.1%
7.6% 31.08.2006
21.4%
Total:1,253
15.1%
17.3%
16.2%
18.7%
Total:1,211
At the end of August 2006 about one-fifth of Russian banks had registered
authorised capital over RUR 300 M
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Market share of different groups of banks/2
01.01.05
Loans
9,3% 0,2%
Top-5 Banks, incl.
Sberbank
Banks 6-20
14,6%
48,9%
10,3%
Banks 21-50
31.07.06
Banks 51-200
Banks 201-1000
16,7%
8.3% 0.1%
14.8%
Banks 1001-
45.8%
11.0%
20.0%
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Market share of different groups of banks/2
6,1%
0,2%
Personal deposits
01.01.05
7,7%
Sberbank
9,9%
31.07.2006
Banks 2-5
6,9%
9,6%
59,6%
Banks 6-20
0.0%
Banks 21-50
Banks 51-200
7.8%
0.0%
11.0%
Banks 201-1000
Banks 1001-
8.0%
11.2%
62.0%
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Sberbank is a banking system itself. The rest is very fragmented,
ripe for consolidation.
Options:
• Closure of a number of very small banks
• M&A in all groups through creation of banking groups,
amalgamation and takeovers.
Limitations: fragmented ownership structure, vested interest
Drivers of consolidation: decrease of profitability from core
operations, high supervisory costs (incl. IFRS), high IT costs. M&A:
Nikoil/Uralsib, Rosbank OVK, VTB/Guta, etc.
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Overweight of Sberbank: share in private deposits
1 January 2004
Sberbank
1 January 2005
Other >1300
banks
37,3%
40.4%
62,7%
59.6%
1 January 2006
Sberbank
Other >1200
46.0%
54.0%
Sberbank’s share slightly decreases over time, but jumps back after each crisis
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks: Branches/1
3500
3000
2500
2000
1500
Total
Sberbank
1000
500
03
/0
4
06
/0
4
09
/0
4
12
/0
4
09
/0
5
12
/0
5
03
/0
6
06
/0
6
09
/0
6
0
Russia overbanked, underbranched
Most of Sberbank’s branches closed down were replaced by other banks’ new branches
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks: additional offices and cash points
18000
16000
14000
12000
Additional offices: All other
banks
10000
8000
Additional offices: Sberbank
6000
Cash points: All other
banks
Cash points: Sberbank
4000
2000
0
05/06
07/06
09/06
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks: Branches/2
Russian banks - branches
(as of 31 July 2006)
2.0%
20.0%
Sberbank
28.0%
Other Top-5 banks
No 6-20
No 21-50
5.1%
19.2%
12.6%
13.1%
No 51-200
No 201-1000
Average number of branches per bank groups
by size (w/o Sberbank)
No 1001-
Most Russian banks have no
branches at all (except for HQ)
45
40
35
30
25
20
15
10
5
0
41
28
13.5
4
No 2-5
No 6-20
No 21-50
No 51200
0.8
0.3
No 2011000
No 1001-
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Banking reform in Russia: key initiatives
• Individual deposit insurance system (in place from mid-2005)
• IFRS
• Adjustments in, and reenforcement of key regulatory measures – i.e., capital,
liquidity, loan loss provisioning
• Credit bureaus
• Legal basis for mortgage lending and mortgage refinancing
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Deposit Insurance System
Highlights:
• 100% coverage of deposits up to RUR 100,000 (approximately $3,000), 90% another
RUR 200,000
• Government guarantee to Sberbank depositors abolished in Oct. 2004
• Quarterly insurance premiums of 0.15% of retail deposits
• At the end of 2005, 930 banks are members
Effects on the banking system:
• Increased stability of retail deposit base
• A more level playing field between Sberbank and other banks
• Funding costs unlikely to rise
•Major concerns
• Quality of bank supervision still weak
• Large number of marginal banks remain
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
2004 market turbulence: major reasons
• Low level of confidence in Russian banks by households and corporates
• Shallow and fragmented interbank market
• Mismatch between shorter-term liabilities and longer-term assets
• Drop in securities prices since mid-April
• Tougher supervision – greater commitment of regulators to end improper banking
practices
• Expectations of a drastic clean-up of the banking industry on the threshold of the
deposit protection system
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Problems with large number of small banks
•
•
•
•
Supervisory risk (small banks may be supervised less efficiently than
”systemically important banks”)
Fragmentation of markets, distorted movement of capital/funds within the region
and throughout with efficiency, product range
Expensive IT/risk management solutions not accessible to smaller banks
Compliance risk
Why smaller banks are needed in Russia?
•
•
•
Geographical and political reasons (subjects of Federation, distances, vast area to
be covered)
Better knowledge of local conditions/clients
Funds more unlikely to leave the regions
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Foreign investments low, but growing
• 42 bank controlled by foreigners (stake over 50%), 48 fully foreign-owned
• Growth of direct investments focusing on retail banking, mortgages
• GE Consumer Finance buys consumer bank, Delta Bank
• BNP’s attempt to acquire a stake in consumer-oriented Russian Standard Bank
fails
• Foreign investors’ impact on industry structure still limited
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks: Foreign ownership (end of period),
number of banks
160
140
120
100%
100
50-99,9%
80
20-50%
60
1-20%
40
up to 1%
20
0
Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Jun 06
In most banks with foreign participation, non-residents have no
controlling interest. ”Foreign” may mean repatriated Russian capital
Foreign banks not authorised to open branches in Russia
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Top-12 Russian banks by Net Assets (unaudited RAS data, June 2006)
VTB
Bank of Moscow
UralSib
Raiffeisenbank
Russian Standard
Promstroybank
0
500
Source: BanksRate.Ru
1000
1500
2000
2500
3000
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Top-13-20 Russian banks by Net Assets (unaudited RAS data, June 2006)
Rosselkhozbank
Promsvyaz
Citibank
Nomos
Mezhprombank
Petrocommerce
VTB-24
Bank Zenit
0
20
Source: BanksRate.Ru
40
60
80
100
120
140
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Loans by currency and borrowers
7000
6000
5000
Corporate loans in FX
4000
Private loans in FX
3000
Corporate loans in RUR
2000
Private loans in RUR
1000
0
2002
2003
2004
2005
2006 July
Loan expansion in all market segments
Hottest segment: private loans (+42.7% in FX, +35.1% in RUR)
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Top-10 Russian banks by corporate loans (unaudited RAS data, June 2006)
Sberbank
VTB
Gazprombank
Alfa-Bank
Bank of Moscow
Uralsib
IMB
Raiffeisenbank
Promsvyazbank
MDM-Bank
0
200
Source: BanksRate.Ru
400
600
800
1000
1200
1400
1600
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Top-11-20 Russian banks by corporate loans (unaudited RAS data, June 2006)
Mezhprombank
Rosselkhozbank
Promstroybank SPB
Rosbank
Nomos
Petrocommerce
AK Bars
BIN
Globex
Zenit
0
10
Source: BanksRate.Ru
20
30
40
50
60
70
80
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Deposits (end of year, bn RUR)
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2002
Corporate in FX
Private in FX
Corporate in RUR
Private in RUR
2003
12/2004
12/2005
07/2006
In 2005, client deposits grow by 36.2% compared to 38.4% in 2004. 36.7% in 2003.
Both corporate and private deposits decline in FX. Corporate deposits in RUR increase
by 56,6%, private deposits by 23.3%. Individual deposits account for 75.8% of total.
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Deposits by maturity
5000
Corporate deposits
ov er 1 year
4500
4000
Priv ate deposits ov er
1 year
3500
3000
Corporate deposits up
to 1 year
2500
Priv ate deposits up to
1 year
2000
1500
Demand deposits of
corporates
1000
500
0
2002
Priv ate demand
deposits
2003
12/2004
12/2005
07/2006
Improving structure: more than half of the deposits are over 1 year,
but only few banks have access to this source of funding
11
.1
1
2. .19
02 97
.1
17 99 1.02
.0 8-1 .1
2
9
2. .19 6.02 98
03 98
.1
16 . 19 -1.0 9 98
.0 98
-1 3.1
3
19 .19 5.0 9 9
.0 98
3 8
5.
-1 .19
1
27 99 8.05 98
.0 8-2 .1
5
9
5. .19 6.05 98
06 98
.1
29 . 19 -4.0 998
.0 98
-2 6.19
6.
24 199 8.06 98
.0 8.1
10 7 .1 23.0 9 98
.0 99
8- 7.1
6.
9
1
24 99 9.06 98
9
.0
1 . -23 .19
7. 20 .01 99
03 00
-6 .2 0
.2
.0 00
0
21
.0 00- 3.2
2
3
0
10 .20 0.0 00
3
.0 00
7.
- .2
20 9.0 0 00
4.
7
11 00- .20
3.
.
0
9. 200 11. 0
04 0- 20
7. . 20 8.0 00
08 02 4.
2
17 . 20 -6. 00
0
2
0
.0
2 . 2-1 8.2
21 20 6.0 00
.0 03
2 2
-2 .20
6.
15 20 0.0 0
.0 03
6 3
1.
-1 .2 0
15 20 4.0 03
.0 04
6.
-1 1.2
26 20 4.0 00
.1 04
6 4
2.
-2 .2 0
26 20 5.1 04
.0 05
- 2.2
6.
20 25. 00
06 06 5
-2 .2 0
2.
1 06
23 0.2
.1 00
0. 6
20
06
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Refinancing rate (%)
160
120
80
40
0
Lowest refinancing rate in the history of CBR
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Net profit for the year (bn RUR)
Profitability
280
240
200
160
120
80
40
0
Share of loss-m aking banks (%)
2000
2001
2002
2003
2004
2005
2006 H1
7
6
5
4
3
2
1
0
2000
2001
2002
2003
2004
2005
2006
H1
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Alternative distribution channels:
Bank cards - Number of cards issued ('000)
70
60
50
40
30
20
10
0
2001
2002
2003
2004
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Total value of operations with individuals’ bank cards (bn RUR)
4000
3500
3000
Payment for goods and
services
2500
2000
Cash withdrawals
1500
1000
500
0
2003
2004
2005
2006
(projected)
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Russian banks’ growth perspectives 2004-2009 (MoF and ARB forecasts)
90
80
70
60
2004
50
40
2009 (Min Fin f.)
2009 (ARB f.)
30
20
10
0
Equity/GDP
Loans/GDP
T.A./GDP
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
Trend in improving creditworthiness continues, but challenges remain
• Positive macroeconomic environment likely to continue
• High growth potential from currently low level of intermediation
• Growth lower in 2004 than in 2003, but still high
• Consolidation likely to accelerate
Market pressures and opportunities
• Retail segment
• Mortgages
• Leasing
• Investment banking
15th BACEE Country and Bank Conference
14-16 November 2006, Budapest
2005-2006 ”hot market” tendencies in retail
•
2005: consumer finance, car loans
•
2006 H1: mortgages, credit card-related loans
– Sberbank’s share down from 80% to 60% in mortgages (with 3.7 bn out
of 6.2 bn USD)
– Total mortgage market increases by 220% to USD 6.2 bn
– Growth rate of car loans down to 33%
– Uncovered retail loans grow by 20%, express-loans by 11%
– Nonperforming express loans’ share increases from 1.9% to 2.9%
(official CRB data). Rus Rating estimates NPL at 28%