Share of Problem Loans in Republic of Belarus may Grow Significantly, Moody's

23.05.2011 14:44

Serious problems in all sectors of the economy may arise due to the rapid devaluation of the Belarusian ruble and the lack of opportunities for the currency loan payers to purchase foreign currency for their redemption in Belarus. "We expect that the proportion of bad loans will reach two-digit numbers from 2% in late 2010," said Moody's analyst Vladlen Kuznetsov.

According to him, this can be avoided only by attracting new investment from abroad. Vladlen Kuznetsov noted that the increase in citizens’ insolvency would strike most severely on private banks. «Most companies, financed by private banks because of their work (they are the exporters) do not have access to profits in foreign currency. Therefore, we expect that they will face greater difficulties in obtaining foreign currency to finance operations,» said the expert.

«The devaluation could cause significant harm to the business clients of private banks and reduce their ability to repay loans. In addition, private banks have a high share of foreign currency lending to borrowers engaged in retail trade. Consequently, the devaluation will have a more negative impact on the loan portfolios of private banks than the government ones, having a lower share of foreign currency lending to individuals,» said Moody’s analyst.

«The majority of Belarusian banks have sufficient means to cope with credit losses of approximately 10%. But expect the worst scenario of more than 20% losses. If this happens, in our opinion, the state-owned banks will receive financial support from the Government, while subsidiaries of foreign banks will receive funds from their foreign partners,» said Vladlen Kuznetsov.