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Credit Squeeze Threatens Banks of Russia
The decline in liquidity may negatively affect business of Russia’s banks in the second half of this year. It may also weaken financial and business achievements of the biggest banks of Kazakhstan and Ukraine, signaled the report of Standard&Poor's dedicated to improved performance of such banks in view of increased risks of liquidity and market risks.
According to the report, the biggest banks of Kazakhstan, Russia and Ukraine continue to show good business results. At the same time, they have to withstand global credit squeeze and growing market risks.
The Standard&Poors analysts forecast that, in the nearest future, the trend of growth and higher efficiency could be suspended by tough conditions on global credit markets, which aggravated liquidity and limited plans of the banks to refinance liabilities, including the foreign debts and loans on capital markets.
Launching the bonds overseas would be more difficult for such banks due to the higher costs. The credit squeeze will reveal greater volatility of resource base and liquidity, which are the structural characteristics affecting the banks of these three countries.
The better part of such banks manifested better efficiency in 2006. In the first half of this year, many of them managed to maintain stable interest margin and even improve it. The basic trends that drove up indicators of banks of Russia, Kazakhstan and Ukraine were their organic expansion, differentiation of their product line in view of the definite market and/or geographical segments, IT improvement and more complex and better thought-of policy of marketing.
According to S&P, the flaws of such banks are growing operating costs, fewer opportunities to attract money (tougher terms and higher costs), weak capitalization, high concentration of sources to raise funds and loan facilities, some deterioration in the asset grade.
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Photo: Pavel Solov
