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Moody’s: Russian banks need $40 billion amid bad loan surge

01 June 2009 10:09 (UTC +04:00)

Bakuâ€“ APA-Economics. Russian banks need a total of 40 billion dollars (28.4 billion euros) of extra capital in 2009 as their bad loans rise to 20 percent of their portfolio, ratings agency Moody’s said.
In a report on the Russian banking sector, Moody’s said that the current level of non-performing loans in Russia was 11 percent of banks’ total porfolio but by the end of the year could reach 20 percent.
"The weaker macroeconomic performance will lead to an erosion of asset quality and pre-provision income which in turn impairs banks’ capital bases," said Semyon Isakov, the report’s author in a statement.
It said the total sum of state aid for Russian banks in capital injections so far amounted to 23.6 billion dollars while additional pledged support amounted to 15.6 billion dollars.
While this almost matches the 40 billion dollar recapitalisation required by the banking sector "this does not necessarily imply that the capital needs of all Russian banks will be fully met by the government," Moody’s said.
It warned that capital support for medium and small sized banks has so far been "insignificant", prompting further consolidation in the sector through mergers and acquisitions.
Russian officials and analysts have warned of a possible second crisis for an economy already battered hard by the financial crisis owing to growing bad corporate debts.
Struggling Russian companies, which built up huge debts during the high growth that has now ended so abruptly, are failing to pay back loans because of the slump in commodities prices and drying-up of foreign capital. Source: AFP