BRIC banks being built to last

Banks in the BRIC world of emerging markets are in better nick than their counterparts in the US and Europe, according to Allianz Global Investors, one of the world’s largest active fund managers.

Allianz, a investment subsidiary of the German insurer with £850bn under management, said the lack of exposure to the toxic assets plaguing Western banks will allow the banks in Brazil, Russia, India and China more flexibility in responding to the challenging economic climate.

Michael Konstantinov, fund manager of the Allianz BRIC Stars Fund, said: “The BRIC markets will of course be affected by the economic slowdown, with a negative effect on non-performing loans, a slowdown in loan growth, and perhaps some margin pressure. However, we are not talking about equity capital being at risk and therefore we believe that in a relatively short space of time these financial systems will be at work again and able to provide credit and liquidity to their economies.”

In Russia, Konstantinov expects a clear consolidation of the fragmented banking system into the leading banks such as state-owned Sberbank. Other state-owned banks and entities like VTB, Alrosa and RZD have already played their part in acquiring and restructuring banks hit by the domestic financial crisis in Autumn last year.

Allianz compares the performance of the BRIC banking sector performance compared to developed markets banks they have outperformed significantly. To demonstrate, Russia’s Sberbank has become almost as big as Britain’s Barclays, but its balance sheet is less leveraged, its interest margin six times larger, and its capital adequacy ratio significantly higher.

allianz

The BRIC markets will be affected by the economic slowdown, with a negative effect on non-performing loans, a slowdown in loan growth, and perhaps some margin pressure. However, we are not talking about equity capital being at risk and therefore we believe that in a relatively short space of time these financial systems will be at work again and able to provide credit and liquidity to their economies.

Konstantinov added: “These countries have also accumulated large reserves that can now be used to stimulate domestic economies. Apart from China, where exports account for roughly 35 percent of GDP, these economies are less export dependent and domestic demand dominates GDP growth. BRIC central banks have been able therefore to do a good job to support the countries’ banking systems.

(Visited 23 times, 1 visits today)

0 Responses to BRIC banks being built to last