Analysts concerned about sudden increase in bank funding by CBR
MOSCOW. July 17 (Interfax) - Analysts are concerned about the steep increase in the amount of funding of Russian banks by the Central Bank (CBR) in June.
This figure surged 33% in absolute terms in June and reached 5.1% of assets, the highest figure since September 2009, Uralsib Capital said in a report. The investment company's analysts believe this points to a deterioration of the liquidity situation.
Analysts at Alfa Bank also think that banks' heavy dependence on funding from the CBR is cause for concern and does not allow the regulator to use interest rates to eliminate inflationary risks, as confirmed by the recent decision not to tighten monetary policy.
"We also confirm our view that banks' increased dependence on CBR funding indicates a potential deterioration in the quality of loans," Alfa Bank said in a report.
"The problem is that CBR money can be used to extend loans, which are refinanced at the Central Bank, and as a result banks have less incentive to monitor the quality of issued loans. If banks raise funding through market resources, they need to worry about the loans being repaid. When banks start to raise large amounts of money from the CBR, at a certain point this could become a problem for the regulator," Alfa Bank chief economist Natalya Orlova told Interfax.
At the same time, analysts are happy about the reduction in delinquent loans in June.
"Delinquent retail and corporate loans decreased in June in absolute and relative terms for the first time in a year. In general, the dynamics of the sector were fairly positive in June," Troika Dialog said in a report.
Uralsib Capital analysts believe that as a result of the drop in delinquent loans in June banks began to reduce provisions, which helped boost profits.
"Preliminary results showed that June also turned out to be not a bad month for Russian banks, which closed the first half of the year on a high note. However, investors mostly continue to ignore the fundamentals of the sector, share prices in which continue to depend to a large extent on the market mood and forecasts for the development of the global economy, where uncertainty remains," Uralsib Capital said, adding that this situation is likely to continue in the short term given the cyclical nature and high volatility of the sector.
