bad debt update __________________________________ richard hainsworth, cfa president rusrating may...
TRANSCRIPT
Bad Debt Update
____________________________________________________________________
Richard HainsworthRichard Hainsworth, CFA, CFAPresident RusRatingPresident RusRating
May 2012May 2012
PerceptionsOutside and Inside
But the facts as a whole “look different”, likepoints in this image are quite different
News presented outside Russia seems distorted to those on the inside(all the news is factual, like every point in this image exists in the original)
Similar news is reported inside and
outsideRemoving the distortion changes the way the image
appears
Underlending by banks to Russian
Economy
2008 2009 2010Brazil 97 98 98China 128 145 148India 68 69 71Russia 24 34 39South Africa 173 184 182UK 212 229 224Germany 126 132 131USA 221 232 232Global average 155 169 170
Bank loans internally, %GDP
Source: World Bank
- Russia value implies banks only lending forworking capital- no infrastructure orasset building investment- also short-term- considerable room forincrease if banks becomeconfident in long term
Increase in Household Wealth and “Middle
Class”
2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
90
100
Household Monthly Rouble Incomes
Over 3500025000 - 3500015000 - 2500010000 - 150007000 - 100005000 - 70003500 - 5000Under 3500
Pe
rce
nt o
f po
pu
latio
n
Source: Russian Federal State Statistics Service
Inflation and interest rates
Source: Sovlink research paper
20002005200620072008200920100
5
10
15
20
25
Price Index- Banks developed in negative real interestenvironment- Corporates can accept high nominal ratesif real rates negative, but not positive- High nominal rates unsustainable- Margins will fall- Overdues may be sensitive to real rateif nominal rate is high (conjecture)
Loan QualityJa
n '0
9F
eb '0
9M
ar '0
9A
pr '0
9M
ay '0
9Ju
n '0
9Ju
l '09
Aug
'09
Sep
'09
Oct
'09
Nov
'09
Dec
'09
Jan
'10
Feb
'10
Mar
'10
Apr
'10
May
'10
Jun
'10
Jul '
10A
ug '1
0S
ep '1
0O
ct '1
0N
ov '1
0D
ec '1
0Ja
n '1
1F
eb '1
1M
ar '1
1A
pr '1
1M
ay '1
1Ju
n '1
1Ju
l '11
Aug
'11
Sep
'11
Oct
'11
Nov
'11
Dec
'11
Jan
'12
Feb
'12
Mar
'12
Apr
'12
May
'12
0
10
20
30
40
50
60
Standard Стандаpтные (Л) Substandard Нестандаpтные (Л)
Doubtful Сомнительные (Л) Problematic Проблемные (Пр)
Hopeless Безнадежные (Пр) NPL NPL % итого
% o
f lo
an
s [%
кр
ед
ито
в]
- migration from standardto doubtful in crisis- migration from doubtfulto standard after crisis- this indicates initialquality of loan book good
Bad Loans RetailJa
n '0
9F
eb '0
9M
ar '0
9A
pr '0
9M
ay '0
9Ju
n '0
9Ju
l '09
Aug
'09
Sep
'09
Oct
'09
Nov
'09
Dec
'09
Jan
'10
Feb
'10
Mar
'10
Apr
'10
May
'10
Jun
'10
Jul '
10A
ug '1
0S
ep '1
0O
ct '1
0N
ov '1
0D
ec '1
0Ja
n '1
1F
eb '1
1M
ar '1
1A
pr '1
1M
ay '1
1Ju
n '1
1Ju
l '11
Aug
'11
Sep
'11
Oct
'11
Nov
'11
Dec
'11
Jan
'12
Feb
'12
Mar
'12
Apr
'12
0
1000
2000
3000
4000
5000
6000
7000
0
200
400
600
800
1000
1200
1400
Retail Loans [Кредиты физлицам] Unimpaired [Кл 2]
NPL [Кл 3-5] (Right/Пр) Overdue [Просрочка] (Right/Пр)
RU
R b
n [Р
уб м
лд
]
- Loan quality not affectedby crisis
Bank Ratingsand Default Counting
(2006 – 2010 inclusively)
Moodys S&P Fitch Actual
Banks Globally
Median Rating A2 A+ A+
Default Probability
1 : 150 1 : 150 1 : 150
Banks in Russia
Median Rating B1 B+ B
Default Probability
1 : 5 1 : 5 1 : 5
Defaults : Banks rated in period
1 : 14
Rating category BB/BaSource: Median ratings – public data for 2006-2010Defaults – RusRatingPD – Central Bank of New Zealand (5-year horizon)
Движения медиалных рейтингов
2006 2007 2008 2009 201090
92
94
96
98
100
102
104
106
108
медиальный рейтинг (100 = 2007г)
F
M
SP
RR
Volume of Internal Bond Markets
Q1 94
Q1 95
Q1 96
Q1 97
Q1 98
Q1 99
Q1 00
Q1 01
Q1 02
Q1 03
Q1 04
Q1 05
Q1 06
Q1 07
Q1 08
Q1 09
Q1 10
0
500
1000
1500
2000
2500
3000
3500
Brazil Бразилия (л. ось)
China Китай (л. ось)
India Индия (л. ось)
Russia Россия (л. ось)
South Africa ЮАР (л. ось)
US
D b
illio
n
In India, China and Brazil, bond rating is mandatory
Bond ratings are not required in Russia and South Africa
Source: Bank of International Settlements
