Economic risks the recent political developments in the U.S. and Europe will continue to affect banks around the world, warns S&P. According to analysts, the Russian banks in the next five years, expect lower returns and tougher domestic competition
The “new normal” for Russia
Russian banks that survived the crisis of recent years, in the next five years will face a “new normal” associated with a low rate of economic growth, said the analysts of Standard & poor’s review of the risks to global financial sector, which entered the RBC. To maintain profits in such circumstances they will have to restructure their business model by reducing risks and reducing costs, analysts said. The rapid growth that was observed in the sector before the crisis, in the coming years is not expected, experts say.
Lending in coming years will grow only 5-7% is a low value compared to the pre-crisis period. The population and business in the coming years will be reluctant to borrow, and the banks themselves will not seek to increase lending because of the risks, experts say.
In 2017, the banks will continue to withdraw from the market, noted S&P. In November 2016 in Russia, there were 649 licensed banks, and at the end of 2013, there were 923. The reduction in the number of credit institutions, analysts associated with the advent of the Central Bank in 2013, Elvira Nabiullina, to carry out the cleaning sector from troubled banks. Despite the withdrawal from the market of small and medium banks, competition in the sector intensified further, noted S&P.
Risks for all
The weak growth of the global economy, political instability in the US and Europe, low interest rates had a negative impact on the work of more than half of the largest banking systems in the world in 2016, States S&P. In 2017, the risks associated with these factors will persist, experts say.
According to the latest estimates, the S&P in 2016 with the negative economic trends faced 11 of the 20 largest banking systems in the world — Russia, China, Hong Kong, UK, Germany, Brazil, India, Australia, Canada, Sweden and Japan. In the analysis the banking system S&P uses the assessment of country risk banking systems in BICRA. This estimate reflects the exposure of the banking system country-specific positive and negative economic and production trends in comparison with Bank systems of other States. Using gradation BICRA, S&P divides Bank systems from the point of view of their vulnerability to trends in 10 groups. The strongest banking system are in group 1, the weakest — in group 10. Russia was in the eighth group, while the rest of the 20 largest banking systems are distributed between the first and sixth.
Trump and Brexit
The key negative factor which affects the ranking of banks, the Agency claims the changes in the global economy related to the slowdown in GDP growth, the weakening of China’s economy, as well as political and geopolitical instability.
In particular, S&P warned about the long-term political implications of a British exit from the EU. In addition, in the coming months in Germany and France will hold an election of heads of the States and in Italy — the constitutional referendum. “In Europe, the spread of populist trends. People are interested in holding a referendum about the exit of their countries from the Union” — noted the analysts of the Agency.
The policy of the administration elected President of the United States Donald trump seems S&P is unpredictable. In this regard, it is difficult to assess its impact on regulation, economic growth, interest rates and, ultimately, the results of the banks, to the review.
A surprise to markets, the results of the U.S. elections have provoked high volatility in the global financial sector. As explained by S&P, market participants are now trying to take into account in their forecasts a possible increase in interest rates by the fed, which will cause instability in the global debt market.