Russian Banking Sector Stable, But Some Risks Growing

Fitch Ratings says in a new report that its outlook for the Russian banking sector is stable. This reflects the still reasonably benign operating environment, the system’s generally satisfactory performance and stable asset quality, and limited refinancing risks given the sector’s predominantly deposit funding.

At the same time, Fitch comments that some risks are growing in the system. The credit ratings agency (CRA) is concerned that rapid retail loan growth could lead to asset quality problems, in particular at banks with less experience in this segment. In addition, higher funding costs, due to greater competition for deposits, coupled with a normalisation of provision expenses, are likely to dampen profitability, and capital and liquidity levels have moderated as a result of overall credit growth.

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