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DatabankNovember 30 2021

Belarusian banks face challenging times ahead

The growing humanitarian crisis at the Belarusian border has incurred additional EU sanctions, which will impact the country’s economic recovery.
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Political tensions on the EU’s eastern border continue to escalate, as the humanitarian crisis intensifies. The bloc retaliated on November 17 with further sanctions against Belarus, adding to those already imposed over last year’s political crackdown and the forced landing of a Ryanair flight in Minsk in May. The sanctions will only impair a stuttering economic recovery.

According to the World Bank, the economy contracted by just 0.9% year-on-year in 2020. During the second half of 2020, foreign exchange deposit withdrawals and household foreign exchange demand put strong pressure on the currency and on banking sector liquidity. The weakening currency contributed to higher inflation (7.4% at end-2020 from 4.7% in 2019).

The World Bank’s outlook for 2021 was a deepening recession and a weak recovery thereafter. However, in August Belarus received $900m from the International Monetary Fund to help the country’s response to Covid-19, which may help support a stronger bounce back.

In 2020, the six largest banks by assets in the country all experienced a year-on-year decrease in their return on assets (ROA) ratio, which is a percentage of how profitable a bank’s assets are in generating revenue. Only one Belarusian lender, Raiffeisen’s subsidiary Priorbank, managed to record an ROA higher than the central and eastern Europe average of 1.2% for The Banker’s Top 1000 World Bank ranking. In 2020, Priorbank’s ROA was 2.49%, which is almost half of its ratio in 2016.

State-owned Belarusbank, the largest Belarusian bank with $12.6bn in assets at the end of 2020, saw its ROA almost halve to 0.64%. Belagroprombank, another state-owned entity and the second-largest bank with total assets of $4.7bn, saw a slighter drop to 0.55%. Belinvestbank, also state-owned, recorded the biggest decline and lowest ROA – dropping to 0.26% in 2020 from 2.41% in 2019.

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Joy Macknight is the editor of The Banker. She joined the publication in 2015 as transaction banking and technology editor. Previously, she was features editor at Profit & Loss, editorial director at Treasury Today and editor at gtnews. She also worked as a staff writer on Banking Technology and IBM Computer Today, as well as a freelancer on Computer Weekly. She has a BSc from the University of Victoria, Canada.
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