15 September 2017

Proxima Capital Group: «Many private banks work poorly with distressed assets due to a lack of capital»

A lack of capital in many private banks is the major reason why they cannot deal properly with distressed assets

Maxim Kravchenko, Managing Partner at Proxima Capital Group, said this on 15 September 2017 at the 5th annual conference Non-performing Loans as an Instrument to Create Value

Maxim Kravchenko moderated the session Non-performing Loans as a Financial Instrument.

“We work with a number of leading banks and rarely hear the word “reserve” from them; but when working with less successful banks we hear about “creating reserves” again and again. Hence, it is clear that the bad debts problem with banks is due to insufficient capital or limited sources for its replenishment”, Mr Kravchenko noted.

Now, banks’ non-performing debts exceed 10% of their assets; this can be seen in the financial statements of the 100 largest players who control over 90% of the market. In this way, banks’ balance sheets are hiding approximately RUB 8 trillion of bad debts.

According to the Central Bank, the banking sector assets exceeded RUB 82 trillion at the end of August (an increase of 4.5%). In eight months of 2017, banks’ retail loan portfolio grew by 7.0% to RUB 11.5 trillion. Lending to the economy grew by 3.5%, including loans to non-financial institutions which grew by 2.3%. Profits reached RUB 997 billion in the first eight months of the year.

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Proxima Capital Group is an independent investment firm that focuses on providing comprehensive financial solutions, including debt restructuring and turnaround management. We are a team of experienced professionals with a successful track record in investment banking, commercial banking, corporate finance, and law in Russia and the CIS.