13 Oct 2009 17:43

Total toxic loans in Russia to top $110 bln by year

MOSCOW. Oct 13 (Interfax) - The international rating agency Moody's forecasts that total toxic loans at Russian banks will top $110 billion by the end of 2009, Moody's said in a press release.

The agency said that this would equal around 20% of total loans in the banking system.

According to Moody's, by the middle of 2009, around 11% of loans ($70 billion), which largely had been provided to the corporate section prior to the crisis, could be declared problematic. However, a substantial portion of total debts have been restructured, the statement said.

Moody's sees this as having a negative effect on the ratings of Russian banks in the short and midterm as it would show the agency's concern about the bank loan indicators among banks. The risk of further instability in the banking system remains quite high owing to negative pressure on capitalization and profitability. This is the case largely because of the worsening quality of assets and liquidity in the system, weakening depositors' confidence and imbalance between assets and liabilities.

Moody's negative forecast regarding the Russian banking system expresses the agency's opinion regarding the likely changes in the sector over the next 12 to 18 months and does not increase or lower its current ratings.