The most of CIS banks are on their way of stabilization and slow recovery - Fitch

/IRBIS, July 29, 2011/ - Fitch Ratings said in a report published today that the credit ratios of banks in most countries of the CIS and Georgia continued to stabilize in the 1st half of 2011, and the agency expects that this process will continue in the 2nd half of 2011 - 2012, was stated in the report released today by Fitch. "Economics in the region recover from the recession, supported by high world commodity prices, and it has a positive impact on asset quality and profitability of banks. At the same time, the agency notes that to date recovery in the banking sector for the most part been slow and uncertain and remain significant vulnerabilities", - was stated in the message. As noted, the degree of recovery of the banking systems varies markedly across countries. Kazakh and Ukrainian banks have been most severely affected during the crisis, and most of them continue to experience difficulties in 2011. Credit institutions in Russia and Georgia, by contrast, had a clear improvement in 2010 and 2011 and still a higher level than comparable banks in the region. Indicators of Banks of Azerbaijan are located between these two extreme situations, while Uzbekistan has been largely insulated from the global crisis. The banking system of Belarus and the economy as a whole face considerable difficulties after the May devaluation. Fitch points out that the profit levels of the Russian banks has improved in recent quarters, supported by the stabilization of asset quality, while stocks of capital and liquidity during the crisis created by the lowering of leverage in the banking system in general are comfortable. At the same time, has increased competition, which contributes to high liquidity, a limited pool of high-quality borrowers and more aggressive strategy of state-owned banks are gradually putting pressure on margins in the long term is likely to jeopardize the stability of many lending institutions of small and medium size. In addition, financial difficulties of the Bank of Moscow in July 2011 and its purchase by VTB Bank with conduction of a minimum pre- legal and financial examination indicated the potential for significant negative surprises in the Russian banking system, but also raised the question about the quality of corporate governance in banks in the public domain, and the effectiveness of supervision by the central bank. Fitch expects that the reservation of problem loans in the Bank of Moscow will have a significant negative effect on aggregate measures of asset quality and capitalization in the sector, probably in Q3 of 2011. Balances of Kazakh and Ukrainian banks were still saddled with high levels of problem assets in the 1st half of 2011, while the results of the sector continue to have small negative values, as some lenders continue to build up reserves. Fitch expects that the banks in these markets will be more actively to resolve the situation with problem loans in the next 18 months, and slowing growth in bad loans should have a positive effect from the 2nd half of 2011. At the same time clearing balances are likely to still be far from complete by the end of 2012, which reflects the extent of problems and legal restrictions. It is noted that the leverage in the banking system of Ukraine and Kazakhstan has declined as a result of contributions of capital, debt relief, limited new lending and rapid growth of deposits. At the same time, there remain significant systemic vulnerabilities. According to Fitch, the capitalization continues to be weak in both markets because of the considerable amount of accrued interest (in Kazakhstan) and the lack of redundancy in restructured loans (in Ukraine). Profitability is also under increased pressure due to lower margins Kazakhstan, and the level of debt funding in the Kazakh banking sector remains substantial. "While the outlook for the banking sector in most CIS countries is stable, the outlook for Belarusian banks is negative. According to Fitch, asset quality and capitalization of the Belarusian banks is likely to worsen (possibly dramatically) as a result of the devaluation, the expected sharp deceleration in credit decline in economic activity, inflation and likely more selective support of the corporate sector of the state. In addition, the banking system there is a shortage of foreign currency liquidity, and it is highly dependent on the confidence of depositors, while the authorities have limited capacity to banks provide foreign currency ", - was stated in the message. [2011-07-29]