Noviye Izvestiya

A second wave of the financial crisis is threatening the global economy, triggered by massive non-repayment of both consumer loans and a wide range of business financing, including loans to some of the world’s largest companies, Deutsche Bank CEO Josef Akkerman stated late last week. Some Russian economists have also expressed concerns that a new banking crisis could break out this autumn. Others insist that bankers are spreading fear in order to win access to fresh government cash.

The recent upbeat note – including predictions of a return to growth in the near future – don’t mean that all the problems created by the global recession are behind us. “The global financial crisis isn’t over yet,” Mr. Akkerman points out, fairly enough. “There’s been a series of earthquakes and the epicentre keeps shifting. The next shock will come in overdue loans. Banks that have handled the crisis fairly well so far are about to face new difficulties,” the [German] banker predicts.

Talk about a new wave surfaced in Russia as far back as late March. “Right now we’re expecting a second wave of problems in the financial system as real sector borrowers fail to repay loans,” Vice-Premier and Minister of Finance Alexei Kudrin warned at the time. Today Russian bankers are echoing that warning. Just recently Petr Aven, the president of one major bank, said that the Russian banking system is going to be hit with an explosion of late loan payments this autumn. “A lot of loans were taken out for one year, and those that were extended before the crisis – in August, September and October last year – are about to come due...,” he explains.

Victoria Belozerova, senior analyst with the national rating agency RusRating, thinks that the second wave is already here. “It’s not so much a second or new wave as the evolution of a crisis that was already under way. It’s continuing to unfold – it never really went away,” she says. “There’s been a more or less linear increase in bank debt each month, so there’s no reason to expect a sudden jump that will lead to collapse.” Even so, Nikita Krichevski, research director with the National Strategy Institute, believes that the problems are going to get worse in the coming months. “Last autumn our banks extended tens of billions of roubles to major companies in the oil and gas, metals, coal and construction sectors,” he told NI. “But there just isn’t the same demand for their services. Output is down and they won’t be able to meet those obligations.”

According to CBR figures, as of 1 June this year overdue loans extended to non-financial organisations stood at 4.5% of the [banking sector’s aggregate] loan book, or 5.5% in the case of retail borrowers. Western experts believe the true figures are considerably higher, somewhere between 10% and 13%. Prognoses for the end of the year vary accordingly. The CBR expects to see bad loans at no more than 12%, while western analysts are predicting upwards of 20%.

“Everything depends on what you’re measuring,” Victoria Belozerova explains. “The CBR is talking about 12% on the basis of balance sheet figures and I accept that number. But the actual share of problem loans could be anywhere from 20% to 40%.” In her opinion, the banking system can withstand even those high figures. “It’s not the absolute volume or percentage of overdue loans that makes a crisis but whether the banking system, non-bank companies and the government are prepared to take appropriate measures. Over the past year we’ve seen ... the bigger financial institutions … getting ready, building reserves, cutting back their balance sheets. The drive to extend new loans is gone. Non-bank businesses are also cutting costs. And here in Russia the retail sector is highly unlikely to bankrupt the system – the social penetration of banking and credit services is just too limited.”

… So far the authorities have so far provided R757bn in financial support to reinforce bank capital. This year, the Central Bank estimates, a further R500bn will be needed – and it is prepared to provide it. Nikita Krichevski thinks that’s exactly what the banks are after with their doomsday predictions. “The share of overdue loans will reach at least 25% by the end of the year, but that’s not critical...,” the expert says. “It’s enough to give the banking system a good shake, but it will survive. But the banks are going to be making a lot of noise to make sure they get government support, as they did last autumn and again in the spring.” In his view, the upcoming banking crisis poses no threat to the real sector economy or to ordinary Russians. “There’s no reason for the average person to be worried, and the real economy has already been knocked out, so it makes little difference whether or not banks face fresh problems... There won’t be any new loans, but then there aren’t any new loans now either.”

Mikhail Zlatkovski