In Q4 2015, the banking system was kept under the pressure of several factors. There is a further weakening of the Belarusian ruble and growth in demand for foreign currency on the domestic market, an outflow of ruble and currency deposits due to the drop in real personal income and change in the legislation, a worsening of the financial standing of legal entities which led to the increase in troubled debt under the granted credits.
Deposit market. New game rules
Entry of Decree No. 7 on Depositing Money into legal force became one of the key events in the banking system in October-December last year. This Decree changed the game rules on the deposit market. The differentiation of the deposits into revocable and irrevocable ones, as well as imposition of an income tax upon the interest rates on deposits for the individuals (for the ruble deposits for the period of no more than one year and for the currency deposits for the period of no more than two years) became the key novelties of the document.
Ruble devaluation, demand for currency and reduction of regulatory capital
The Belarusian ruble continued to fall in Q4. At month-end October-December, the average exchange rate of the Belarusian ruble against dollar decreased by 8.7% as compared to Q3. In October-December, the exchange rate of the Belarusian ruble against euro went down by 7.0%, against the Russian ruble – by 4.0%.
The Belarusian ruble weakening resulted in the growth in demand for foreign currency.
Lending to economy sectors and growth in troubled debts
The financial standing of many companies worsened in Q4 and the current assets of the economic entities washed out. When the financial solvency of the economic entities worsened, the non-payments of the clients for the taken banking credits grew that led to the increase in troubled assets in the banking system. Many banks had to continue to conduct a conservative credit policy in these circumstances counting not on the growth in credit portfolios but on the reduction of the share of troubled debts and portfolio upgrading.
The performance of the banks in Q4 significantly influenced their financial indicators for 2015. Total net profit of the commercial banks fell by BYR 2,073.9 billion over the last year. Total net profit made by the banks in 2015 equaled to BYR 5,659.4 billion versus BYR 7,733.3 billion in 2014 (minus 26.8%).
The change in profit performance under the influence of different factors largely determined the shifts in the Belarusian Banks Efficiency Rating.
Priorbank and Belgazprombank shared the first place in the Efficiency Rating at year-end 2015. Both banks took the first and the second places respectively by the amount of net profit made in 2015.
Over the last year, Priorbank increased its net profit by BYR 186.8 billion or almost 20% to BYR 1,134.4 billion. Threefold growth in net provision for reserves did not prevent it. Provision for reserves grew to BYR 1,762.4 billion.
Belgazprombank increased its net profit by BYR 256.0 billion or 33.4% to BYR 1,022.8 billion. The profit rose at the expense of the growth in net income on foreign currency transactions (from BYR 64.0 billion to BYR 795.5 billion) and the growth in net interest income (from BYR 957.4 billion to BYR 1,222.6 billion).
TC Bank took the third place in the Efficiency Rating for the last year in spite of deduction in the subratings in ratio of net profit to assets and capital. Over the last year, the bank's net profit grew insignificantly – by BYR 1.6 billion to BYR 170.9 billion.
BNB-Bank improved its rank by one position (from the 5th to the 4th place) in the Efficiency Rating. It has one of the highest indicators in the subratings in ratio of net profit to assets and capital. At that, the net profit of BNB-Bank reduced from BYR 92.9 billion to BYR 90.4 billion over the previous year. One of the reasons for net profit decrease is significant growth in provision for reserves (from BYR 15.0 billion to BYR 104.8 billion).
BSB Bank closed the top 5 of the Banks Efficiency Rating for the last year. The bank lost one position as compared to the last rating. In general, BSB Bank decreased its net profit by almost BYR 30.0 billion to BYR 121.3 billion over the last year.
Alfa-Bank and Bank VTB (Belarus) demonstrated the best dynamics of movement in the Efficiency Rating. They improved their ranks by six positions at ones and took the 9th and the 12th places, respectively. It was thanks to improvement of the positions in the subrating in ratio of net profit to assets and in the subrating in ratio of net profit to capital. Over the last year, Alfa-Bank increased its net profit by BYR 18.7 billion to BYR 177.4 billion, Bank VTB (Belarus) – by BYR 7.8 billion to BYR 120.4 billion.
Belarusbank lost three positions (from the 11th to the 14th place) in the Efficiency Rating. Belarusbank's net profit fell by BYR 659.4 billion or almost 40.0% to BYR 1,004.6 billion over the last year. Significant growth in provision for reserves (by 9 times as compared to 2014) affected the changes in net profit. Provision for reserves rose to BYR 3,732.2 billion.
MTBank changed the owner lost 5 positions in the Efficiency Rating at once having moved from the 10th to the 15th place. Its net profit dropped by 4 times to BYR 52.1 billion over 2015.
The greatest decrease in the Rating was shown by HCBank that lost 16 positions. At year-end, the bank took the 23th place among 26 banks. Over the last year, the profit of HCBank fell by BYR 12.1 billion (to BYR 24.1 billion). The bank made a loss amounting to BYR 46.8 billion over Q4. As compared to the last rating, the bank lost 10 points in the subrating in ratio of net profit to assets and 11 points in the subrating in ratio of net profit to capital.
The finance indicators of the bank worsened due to the consumer lending market decline in Belarus. At year-end 2015, the bank's net interest income decreased more than twofold to BYR 97.0 billion, net commission income – by 10.3% to BYR 246.6 billion. At the same time, the bank made a foreign currency transaction loss amounting to BYR 12.1 billion.