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The Belarusian Banks Efficiency Rating in Q1 2015: falling revenues and system mopping-up

Ratings
15:15 | 14.05.2015 | Business-News

Quarter I was marked for the banking system by normalization of credit and monetary policy, the gradual withdrawal of emergency measures introduced by the authorities in connection with financial crisis and subsequent step-by-step devaluation of the Belarusian ruble. In January, as a result of organizations and the population’s excessive foreign currency demand relief, as well as nulling tax rate for its purchase, the National Bank eliminated the exchange rates multiplicity on the domestic foreign exchange market and revived the mechanism of pegging the Belarusian ruble to the foreign currencies basket.

 

Changes in the Regulator interest rate policy as a whole were aimed at reducing the rates of the credit and deposit market. The refinancing rate was increased once (from 20% to 25% per annum on January 9) and has no longer been adjusted, while the banks’ rates on liquidity support operations were established by the National Bank on a regular basis with a decrease of the previous value. On January 14, the interest rates on standing facility and bilateral bank liquidity support operations were reduced from 50% to 40% per annum, and on March 9 – from 40% to 35% per annum.

 

In order to improve the banks’ access to resources in foreign currency, the National Bank has periodically lowered the required reserve ratio from funds attracted in foreign currency. On January 1, the norm of reserve requirements for such funds was reduced from 13% to 12.5%, on February 1 – to 10%, on March 1 – to 9%. The National Bank in Q1 also lifted the restrictions on foreign currency lending to institutions having foreign exchange earnings sufficient to fulfill the obligations under the contract.

 

The elimination of an acute shortage of foreign currency liquidity was evidenced by the return of the norm on compulsory sale of foreign currency earnings of economic entities to the pre-crisis level. On February 25, the compulsory sale norm of was reduced by the Regulator from 50% to 40%, on 15 April – from 40% to 30%. In Q1, the National Bank also lifted the ban on the purchase and sale of foreign currency on the OTC market introduced at the end of December last year.

 

On February 1, the National Bank lifted the ban on increase in banks' claims to the economy in Belarusian rubles. In January-March, the banks' claims to the economy grew by 9.7%, while the forecast growth for 2015 was within the range of 17 to 22%. However, due to the bank’s tightening of approaches to dealing with applications from potential borrowers, a lion's share of growth in claims in Q1 fell on revaluation of foreign currency differences. Among the borrowers of ruble loans, public sector enterprises dominated, while the organizations of private ownership only reduced the debt under loans in the national currency.

 

On January 1, the new requirements in relation to the size of regulatory capital of EUR 25 million came into force. However, not all the banks managed to comply with the Regulator’s requirement. As a result, the National Bank made a decision to suspend the license of 4 banks for conduct of certain banking activities that provide for the regulatory capital of at least EUR 25.0 million. On January 29, the Regulator suspended the licenses of InterPayBank, BIT Bank, Eurobank and N.E.B. Bank for a one-year period.

 

In March, the composition of the MTBank beneficial owners changed. On March 12, the National Bank made a decision to introduce a provisional administration in Delta Bank, and on March 18 already, Delta Bank’s license was revoked.

 

A logical result of the banks’ operation amid the Regulator’s stiff measures to eliminate the crisis consequences of the last year end has become the deterioration of the final financial result. The net profit of the banking system in Q1 amounted to BYR 758.2 billion, while in January-March 2014 it was equal to BYR 1,466.0 billion. The banks’ earnings were heavily pulled down by the Delta Bank results, whose net losses over the three months made up BYR 602.1bn.

 

A significant change in external influence factors predetermined substantial changes in the Belarusian Banks Efficiency Rating. Belgazprombank moved in the Efficiency Rating from the third position to the first one. The bank managed to increase the number of points in all the three sub-ratings that made it ta absolute leader. Belgazprombank increased its assets from BYR 22,405.7 billion as of January 1 to BYR 26,623.8 billion as of April 1. The bank’s net profit in relation to that obtained in Q1 2014 increased by BYR 76.1 billion. This net profit growth was determined mainly by the success of foreign currency transactions and financial derivatives.

 

Priorbank moved down by one position to the second place, having lost points in each of the sub-ratings. In terms of the average assets amount, Belgazprombank is ahead of Priorbank. Priorbank’s profit increased as compared with January-March 2015 by BYR 10.4bn only. The bank has increased its net allocations to the reserves by BYR 323.8bn and its operating expenses – by BYR 57.0bn.

 

TC Bank went up from the fifth to the third place in Q1. TC Bank’s joining of the top three leading banks was ensured by improvement of its sub-rating in terms of the net profit and capital ratio. In the period from January 1 to April 1, the bank's capital increased by BYR 76.6 billion, and the net profit over January-March amounted to BYR 57.7 billion, which is BYR 49.2 billion more than over January-March 2014. The net revenue from the foreign exchange operations of TC Bank increased against the same period last year by BYR 188.2 billion, or by 167 times. It should be noted that on April 29 the National Bank made a decision to extend its earlier decision to suspend the license of CJSC ‘TC Bank’ for banking activities in respect of certain banking operations for one more year.

 

The fourth position after the ninth one in the previous quarter is now occupied in the Efficiency Rating by Moscow-Minsk Bank. The bank improved its position in the sub-ratings of return on assets and return on equity. It managed to increase the net revenue from operations with foreign currencies and to reduce the operating costs both in comparison with Q1 and Q4 2014.

 

VTB Bank (Belarus) moved from the 18th-19th position to the fifth one by making a third largest breakthrough in the Efficiency Rating. Like in the case with Moscow-Minsk Bank, this bank went up due to its increase in the sub-ratings in terms of profit vs. assets and capital ratio. Having the negative net revenue from operations with foreign currencies (minus BYR 205.1 billion in Q1), the bank received in January-March a record-high net income from financial derivatives (BYR 298.7 billion). This income exceeded the net income amount under this heading over the entire 2014. It is worth noting that from January 1 to April 1, the derivative financial assets of the bank diminished by BYR 283.2bn.

 

Zepter Bank managed to move from the 21st position to the 6th one. Having worsened its position in sub-rating of the average assets amount slightly, Zepter Bank appeared on third place in the sub-rating of profit vs. assets and capital. The net profit in Q1 totaled BYR 21.1 billion, which is more than over the entire 2014. The net profit of Zepter Bank in terms of foreign currency operations reached BYR 62.3 billion over January-March, or BYR 19.3bn higher than in 2014.

 

BPS-Sberbank and RRB-Bank rolled 16 positions down. BPS Sberbank fell from the 6th to the 22nd position mainly due to the rapid deterioration of the situation in the sub-rating of the profit vs. capital ratio. RRB Bank stepped back from the 13th to 29th position in the Efficiency Rating. The improvement by one position in the sub-rating of the average assets didn’t compensate for the decline to the antepenultimate place in the sub-rating of profit vs. assets and capital.

 

MTBank and BSB Bank lost nine positions each in the Rating and dropped out of the TOP-5. MTBank appeared on the 11th position after the second place, having completely lost the overall lead in the sub-rating of profit vs. assets and capital. The fourth place of BSB Bank was replaced with the 13th one as a result of moving from the second position in the sub-rating of profit vs. assets and capital.

 

BNB Bank that who ranked 7th in the Rating in Q4 worsened its position in Q1 and took the 12th position. The bank reduced its profit in comparison with January-March 2014 by BYR 5.1 billion at the expense of a significant increase in the net losses on operations with financial derivatives (by BYR 56.6 billion to BYR 63.8 billion). In Q1 2014, BNB Bank had a negative figure of net transfers to the reserves, whilst Q1 2015 brought it to the area of positive values (BYR 32.4bn).

 

BIT Bank ranked the last in the Efficiency Rating, having fallen down from the 23rd position. In Q1, the bank took the last but one position in the sub-ratings of profit vs. assets and capital. The net losses of BIT Bank in January-March amounted to BYR 11.1 billion, while in January-March 2014, there was a net profit of BYR 4.1bn. A sharp rise in the net income from operations with foreign currencies (by more than 3 times against Q1 2014) didn’t compensate for an increase in the net allocations to the reserves – up to BYR 35.8 billion, or 9.5 times more than in the comparable period of 2014. On May 7, the National Bank withdrew from BIT-Bank the license for conduct of banking activities.

 

InterPayBank that had been devoid of the license on May 8 has improved its position in the Efficiency Rating by four positions and took the 18th place. In comparison with Q1 2014, InterPayBank increased its net profit by BYR 3.8 billion to BYR 4.3 billion by enhancing its net revenue from operations with foreign currencies. At the same time, the net transfers to the reserves of InterPayBank grew in Q1 as compared with January-March 2014 by BYR 38.2 billion to BYR 39.3 billion.

 

 

Rank

Bank name
(1)

Rating of

assets, number of points
(7)

Rating of net profit vs. assets, number of points
(8)

Rating of net profit vs. capital,
number of points
 (9)

Total rating,
number of points
(10)

1

Belgazprombank

26 (↑1)

25 (↑3)

30 (↑2)

81 (↑6)

2

Priorbank

25 (↓1)

24 (↓2)

27 (↓2)

76 (↓5)

3

TC Bank

19 (↑2)

28 (↓1)

28 (↑5)

75 (↑6)

4

Moscow-Minsk Bank

22 (0)

22 (↑5)

25 (↑4)

69 (↑9)

5

VTB Bank (Belarus)

24 (0)

18 (↑10)

24 (↑9)

66 (↑19)

6

Zepter Bank

7 (↓1)

29 (↑10)

29 (↑19)

65 (↑28)

7

BBSB Bank

1 (↓2)

31 (↑3)

31 (↑12)

63 (↑13)

8-9

Idea Bank

18 (↓1)

21 (↑3)

23 (↑5)

62 (↑7)

Absolutbank

6 (0)

30 (↑29)

26 (↑24)

62 (↑53)

10

BelVEB Bank

27 (0)

14 (↓1)

19 (↑)

60 (↑1)

11

MTBank

21 (0)

17 (↓8)

21 (↓10)

59 (↓18)

12

BNB Bank

17 (↑1)

19 (↓4)

22 (↓5)

58 (↓8)

13

BSB Bank

12 (↓1)

23 (↓7)

20 (↓10)

55 (↓18)

14

Alfa Bank

23 (0)

13 (↓3)

18 (↓2)

54 (↓5)

15

Belarusbank

31 (0)

9 (↑4)

13 (↑2)

53 (↑6)

16

Belagroprombank

30 (0)

10 (↓1)

11 (↓3)

51 (↓4)

17

Fransabank

11 (↑1)

20 (↑8)

16 (↑9)

47 (↑18)

18

InterPayBank

4 (0)

27 (↑3)

15 (↑7)

46 (↑10)

19-20

Belinvestbank

28 (0)

7 (↓3)

10 (↓6)

45 (↓9)

N.E.B. Bank

2 (↑1)

26 (↓5)

17 (↓9)

45 (↓13)

21

Technobank

14 (↓1)

15 (↓12)

14 (↓8)

43 (↓21)

22

BPS Sberbank

29 (0)

5 (↓9)

8 (↓17)

42 (↓26)

23-24

BTA Bank

10 (↓1)

11 (↑4)

12 (0)

33 (↑3)

Eurotorginvestbank

8 (↑1)

16 (↑3)

9 (↑3)

33 (↑7)

25

Paritetbank

15 (↑1)

8 (↑4)

6 (↑2)

29 (↑7)

26

HCBank

16 (↓2)

6 (↓6)

5 (↓8)

27 (↓13)

27-28

Delta Bank

20 (0)

1 (↓1)

1 (0)

22 (↓1)

Eurobank

3 (↑1)

12 (↑6)

7 (2)

22 (↑9)

29

RRB Bank

13 (↑1)

3 (↓17)

3 (↓21)

19 (↓37)

30

Trustbank

9 (0)

4 (↑1)

4 (1)

17 (↑2)

31

BIT Bank

5 (0)

2 (↓19)

2 (↓7)

9 (↓26)

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