Identifier
Created
Classification
Origin
07MINSK1044
2007-12-21 10:20:00
CONFIDENTIAL
Embassy Minsk
Cable title:  

BELARUSIAN BANKING'S MIXED BALANCE SHEET

Tags:  EFIN BO 
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VZCZCXRO7566
RR RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHSK #1044 3551020
ZNY CCCCC ZZH
R 211020Z DEC 07
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 6748
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/TREASURY WASHDC
RUEHVEN/USMISSION USOSCE 1770
RUEHBS/USEU BRUSSELS
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
C O N F I D E N T I A L MINSK 001044 

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/21/2017
TAGS: EFIN BO
SUBJECT: BELARUSIAN BANKING'S MIXED BALANCE SHEET


Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
-------

C O N F I D E N T I A L MINSK 001044

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/21/2017
TAGS: EFIN BO
SUBJECT: BELARUSIAN BANKING'S MIXED BALANCE SHEET


Classified By: Ambassador Karen Stewart for reason 1.4 (d).

Summary
--------------


1. (C) The Belarusian banking sector continues to grow and
generate considerable interest from potential foreign
investors. Nonetheless, the ability of banks to drive the
Belarusian economy remains limited due to the slowing pace of
foreign investment into the sector and the reduced quality of
investments. Over-investment into the real estate sector may
spell economic troubles ahead. End summary.

Banking Sector Posts Impressive Figures
--------------


2. (U) Speakers at the December 14 conference "Banks, Capital
and Investment for Business and Regions" presented evidence
of significant growth in Belarus' banking sector. Anastasiya
Nikolayevna Luzgina of the IMF said that in 2007 bank credits
more than made up for reduced investment from the government
and from firms' own resources. She said long-term loans grew
from 20 percent of GDP in 2006 to nearly 40 percent by
September 2007. Profitability in the sector stood at a
healthy 9.9% and problem loans amounted to just 0.78% of
total portfolios, according to Luzgina.

Foreign Interest in Banking Sector
--------------


3. (U) Algerdas Nikolayevich Tabatadze presented Dutch-owned
Home Credit Bank's ambitious plans for expansion. A small
retail bank in operation less than two weeks, the bank hopes
to expand into the regions and lend to 100 new clients a day.
Shirai Takeshi and Denis Deripasko of Sumitomo Mitsui
Banking did not mention specific deals, but suggested the
bank would look at financing for the energy sector and
possibly bring Belarus into the carbon credit matching
business. British Charge Nigel Gould-Davies said Belarusbank
would soon raise capital through the London Stock Exchange.

State Sector Dominance Holds Back Efficiency
--------------


4. (U) Despite this interest, Feliks Iosifovich Chernyavskiy,
Chair of the Association of Belarusian Banks, complained that
the slow growth of foreign investment would limit Belarusian
banks. He said foreign investment had grown by only 9% since

2000. State run banks, which still dominate, attracted only
8% more capital this year, versus 10% for private banks. He
said banks were keeping salaries and staff training costs
down as a result. Finally, Chernyavskiy argued that the
effectiveness of investment also left room for improvement,
with each USD 100 of investment now bringing under USD 103 in
GDP, down from USD 108 in 2002. Luzgina also called for
increasing both the quantity and quality of investment, as
well as for creating equal conditions for private banks.

Comment: Quality of Loans More Important than Quantity
-------------- --------------


5. (SBU) The most interesting comments of the day came from
Strategy Research Center Director Leonid Zaiko. Zaiko, not
normally the most bearish of economists, said the mortgage
crisis could easily come to Belarus. Household borrowing for
real estate purchases in 2007 exceeded industrial borrowing.
The increased lending drove up prices, and along with
increased prices for energy and food risked creating an
inflationary wave. The increasingly important role of
foreign factors and household spending threatens the GOB's
sense of control. He said so far the GOB cannot figure out a
strategy to reassert its total dominance over the economy.
STEWART