Stakes in "Sбере" analogy equate to breathing underwater, emphasizing the dire necessity.
Going Under: The Struggle of Sberbank and High Interest Rates
Sberbank has been grappling with a surge in loan restructuring requests due to the prolonged high key interest rates in Russia, currently hovering around 20%. Alexander Vedyakhin, the first deputy chairman of Sberbank, revealed this during the St. Petersburg International Economic Forum.
"Our portfolio is holding up, but the landscape could change if the high-interest rates persist," Vedyakhin cautioned RBC TV. He likened the situation to diving, stating, "If you need to stay underwater for too long, we'll all need to take a breath eventually."
Between corporate and retail portfolios, problem loans amount to ₽5.7 trillion, with the share of problem loans in retail segments escalating to 5.5%, according to the Bank of Russia's overview of banking sector development as of April.
Despite the Central Bank's marginal rate cut from 21% to 20% in June, experts predict that even a 1-2 percentage point decrease won't significantly improve credit conditions. This suggests that restructuring requests might continue to pile up, potentially signaling a prolonged period of financial strain for Sberbank.
Banks with robust capital buffers and exposure to state-backed projects may be more resilient, but overall, the elevated key rates hinder economic expansion and credit quality. Vedyakhin projects a restrained GDP growth of merely 1-2% for 2025, lower than government forecasts, indicating a subdued economy and cautious borrowers, vital factors that affect credit portfolio performance at Sberbank.
In essence, the high key rate fosters an environment where borrowing costs remain high, discouraging new credit uptake and heightening financial pressure on existing borrowers. This environment leads to more frequent restructuring requests, as clients manage cash flow challenges. The prolonged high key rate impacts Sberbank's credit portfolio growth, increasing the risk of credit performance deterioration.
The sustained high key rate hinders economic recovery and complicates credit portfolio stability at Sberbank. It's like being underwater for too long, as Vedyakhin put it. A reduction of rates to below 15%, ideally between 12-14%, is necessary to revive investments, reduce restructuring demand, and stabilize credit portfolios. This underlines the need for more meaningful monetary policy easing to support both borrowers and lenders.
"Sberbank's financial struggle under high-interest rates might require reevaluation in investing strategies, given the rising restructuring requests and problem loans."
"If the Central Bank fails to lower key rates substantially, the continued financial strain on Sberbank could persist, potentially impacting the business environment and credit performance of other institutions as well."
