Rustam Botashev, Equity Analyst at Unicredit Securities
Foreign financial institutions intend to invest up to $170m in overdue loans in Russia, Kommersant reports. The IFC alone, through collection agency KG EOS Holding GmbH & Co, plans to invest $50m in bad debt.
Our view: The total volume of overdue loans in Russia stood at RUB 1,043 bn ($34.8bn) as of end-November 2009, representing around 6.4% of the aggregate loan portfolio. In other words, the foreign financial institutions would be purchasing slightly less than 5% of overdue loans, which is far from enough to clean up bank balance sheets.
On the other hand, we see the intention as a positive signal confirming stable external interest in the Russian banking industry.
We expect total overdue loans to peak in 1H10E at around 11%-12% and Russian banks to start cleaning up their balance sheets. Foreign investors being ready to buy out bad credit from local banks should facilitate this process, and we believe that it would likely increase prices for past-due loans, which should have a positive effect on bank financials.
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