The Central Bank has developed new rules of capital calculation

The Central Bank (the CB) has implemented new rules of capital calculation. It is suggested to take into account the assessed value of securities, have been recorded in the depository, as well as reliability index of the person involving in rights record keeping where the account of deposit was opened. In the explanatory note the CB marks that change in the capital calculation will not be resulted in increase of load upon capital of depositories not using the practice of creating an “endless” chain of owning, as well as for those who open accounts of deposit only in highly reliable accounting organizations, such as the Central Securities Depository, Settlement Depository or Registrar.

The measurers offered are aimed to prevent the withdrawal of clients’ money. Today there is a possibility of creating the “endless” chains of owning, that means not only the significant increase of operating risks for securities market’s participants, but also the possible loss of securities by their holders. The CB representatives note that non-transparency of the securities rights accounting makes the supervision on market’s participants complicate.

The Central Bank is overly concerned with the problem of depositories’ qualification after the bankruptcy of five banks controlled by Matvey Urin. The bankruptcy cost 10,3 bln. RUB for the Deposit insurance agency. Back then the established pattern of fictitious securities purchase was used to siphon the deposits off “Urin’s banks”. After the uncovering of that system, the CB management decided to increase reserves for securities, accounted in doubtful depositories.

The experts note, that the adopted requirements of keeping securities in small depositories (with the capital up to 350 mln. RUB) appear to be blocking-off, because of the necessity to reserve 50% of the assets value in the nominee account. The blocking-off is significantly lower (0,01% of the assets value) for depositories with the capital of 350 mln. to 1 bln. RUB. But it also can be sensitive for some participants.

At the same time, the document is not obliged to keep all securities in major depositories. In case someone decides to keep securities in small little-known depository, there must be capital to cover potential losses. Therefore, the experts agree that the submitted document is a try to limit cases of securities keeping simulation.

Sberbank spent RUB 360 billion for reserves in 2014

According to international reports, the net profit of Sberbank reduced by 19,8% and amounted to RUB 290,3 billion as of year-end 2014. The representatives of the bank name among the key reasons of net profit reduction the increase of expenses on creation of reserves. Last year the reserves achieved RUB 361,4 billion last year.

The last year turned out to be complicated for the domestic financial sector. The increase of the key interest rate to 17% in the end of the year caused the steep money appreciation while the rumors about the exit of the international Payment Systems Visa and MasterCard from the Russian market generated the panic among the clients. They massively began to withdraw their money from the accounts. The Sberbank felt the bite.

As of year-end 2014 the return on equity of Sberbank amounted to 14,8%. According to Alexander Morozov, the Financial Director of Sberbank, the reduction of the return on equity lower than 10% is expected in the current year. The bank representatives explain the significant reduction of the net profit last year by the increase of expenses on creation of reserves from RUB 135 to RUB 361,4 billion.

NPL Mostovik, OAO Mechel as well as credit in Ukraine are worth noting among distressed assets of the state bank. According to Morozov’s estimates, the financial difficulties related to these assets cost the bank 1-1,2 margin percentage points. It decreased from 5,9% to 5,6% over the last year. In the beginning of the current year the net interest margin dropped to a record minimum and amounted to 3%. However as of year-end 2015 the bank expects the net interest margin above 5%.

The bank representatives stated that they are ready to sacrifice the market share for the quality of assets. Thus Sberbank plans to reduce the retail uncovered lending and to concentrate on mortgage services. Last year namely the mortgage portfolio became the major source of the credit portfolio increase by 44,7% as of year-end. In addition, the share of non-performing loans increased from 2,9% to 3,2%.

In whole Sberbank managed to demonstrate pretty good result under current condition. The bank showed the good dynamic of interest and fee revenue. While the mortgage lost the ground not that much as it was expected. At the same time in the fourth quarter of the last year Sberbank managed to economize on the payment of interest on the background of funding cost increase. Due to the fact that the depositors re-deposited the assets or converted them.

As of year-end 2015 Sberbank is willing to get the profit. The Central bank of Russia lowered the key interest rate from 17% to 14%. According to Alexander Morozov, this fact gives to the bank additional RUB 105 billion of income.