Russian and CIS Banks’ Single-client Concentrations Show Growing Risks

Concentration levels in loans at Russian and Commonwealth of Independent States (CIS) banks have increased to their highest level since year-end 2007, while deposit concentrations show a neutral trend, said Moody’s Investors Service in its 2011 survey of Russian and other CIS banks’ single-client concentrations in loans and deposits. The rating agency believes that concentrations in loans will increase in 2012, while those in deposits will remain stable.

The survey captures the evolution of banks’ top 20 largest loans and deposits since 2007, based on data from 85 banks in Russia and 50 banks in other CIS countries.

For the CIS region, the average ratio of top 20 loans/shareholder’s equity increased to 238% at mid-2011, from 225% at YE2010 and 210% at YE2009. More importantly, the ratio of top 20 loans/gross loans increased to 45% at mid-2011, the highest level since 2007 (42%). The high levels of credit concentration will likely amplify CIS banks’ asset quality pressures as macro-conditions deteriorate in 2012.

In Russia, the largest economy in the region, credit concentration metrics have also deteriorated: the ratio of top 20 loans/shareholder’s equity increased from 211% in 2009 to 244% by mid-2011. This signalled that banks were resuming credit growth through large exposures, which exerted further pressure on banks’ capital.


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