Russian banks will require $40 billion extra capital: Moody's

01 June 2009

Russian banks will require extra capital of $40 billion this year in view of bad loans rising to 20 per cent of their portfolio, says ratings agency Moody's.

Moody' said in its report on the Russian banking sector that the current levels of non-performing loans in Russia were about 11 per cent of the banks' total portfolio and were expected reach 20 per cent by the end of the year.

According to Semyon Isakov, analyst at Moody's Investors Service, "The weaker macroeconomic performance will lead to an erosion of asset quality and pre-provision income, which in turn impairs banks' capital bases."

The report said total sum of state aid for Russian banks in capital injections so far was $23.6 billion while additional pledged support totalled $15.6 billion.

Although this nearly matches the $40-billion re-capitalisation needed by Russian banks, Moody's said, "This does not necessarily imply that the capital needs of all Russian banks will be fully met by the government."

In February, the Russian finance minister Alexei Kudrin had said that the government would expand a financial support package for Russian banks and inject 40 billion dollars in new capital.