BELARUS: Banking outlook remains negative since 2009

The outlook for the Belarus banking system remains negative where it has been since 2009, Moody's Investors Service said in a report.

The negative outlook reflects the anticipated further weakening of the country's operating environment, further deterioration in asset quality and capital adequacy, low foreign-currency liquidity relative to high levels of foreign-currency deposits and further worsening in profitability. It also factors in the government's limited and potentially weakening ability to extend support to the banks.
Moody's expects that Belarus's already weak operating environment for banks will face further deterioration in 2015 due to economic contraction and external pressures, which largely stem from the recession in Russia, the country's largest export market.
Banks' asset quality and capital adequacy are also likely to worsen, with the economic slowdown and recent sharp depreciation of the Belarus rouble having negatively affected the ability of many corporate borrowers to service their loans.
Belarus banks lack sufficient liquid foreign-currency assets to cover their large foreign-currency deposits (57% of total deposits), suggesting that temporary capital controls could return in the event of severe exchange-rate volatility.
The rating agency concluded that shrinking net interest margins as well as increases in credit and operating costs will weaken banks' profitability over the next 12-18 months.