After two years of robust profits demonstrating Russia’s resilient wartime economy, some Russian banks are now facing increased scrutiny over their exposure to bad loans, the Financial Times reports.
Russian banking executives have been urging the central bank, led by Elvira Nabiullina, to lower interest rates to ease pressure on corporate clients and, to a lesser extent, households struggling to secure, repay, and refinance debt at high costs. In response, the central bank has gradually reduced its benchmark rate from a record 21 percent in June to 18 percent last month, signaling further cuts aimed at achieving a 4 percent inflation target by next year.
Despite these efforts, concerns remain that certain banks, particularly those with heavy exposure to weaker sectors such as construction, coal, and real estate, could face difficulties. Credit Bank of Moscow, under its third chairman in less than a year, is under particular scrutiny. Last year, it reported a 65 percent drop in net profit, leading Russia’s largest credit rating agency, Expert RA, to warn of a “high probability” of needing external support. Historically, the bank has received backing from state energy giant Rosneft. The bank did not comment on these developments.
Nabiullina has downplayed fears of a banking crisis, stating the central bank sees “no need for the recapitalisation of large banks due to some overhang or potential overhang of bad debts,” and asserted that the situation with problem loans is “better than people sometimes make out.” She highlighted that the banking sector as a whole posted profits of 1.7 trillion rubles in the first half of this year.
However, Nabiullina acknowledged uneven capital distribution among banks, suggesting some may lack the buffers their peers have. Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center, told the Financial Times that while some banks face trouble from risky strategies, this does not indicate systemic weakness.
Following a “super bonanza” year in 2024, when the sector recorded 3.8 trillion rubles in profits, many banks are eager to maintain their gains despite emerging challenges. According to a source familiar with Russian officials, some lenders are “quite affected” by non-performing loans, particularly those exposed to Russia’s most troubled industries, but the overall exposure remains “quite limited.”
The central bank is equipped with various tools to support banks and manage credit portfolio restructuring, the source said, recalling a major 2017 bailout of three private lenders that involved spending at least 1 trillion rubles. “Is it concerning? Yes. Is it very concerning? I wouldn’t say so,” the source added.
High interest rates over an extended period naturally increase non-performing loans, as many borrowers struggle with expensive financing, a former central bank official explained. The official said the central bank will either have to provide support or push rates down to alleviate pressure.
Even large banks like Sberbank and VTB have seen rises in bad loan provisions. Sberbank’s first-half 2025 results showed its cost of risk rose to 1.71 percent in Q2, up from 0.97 percent a year earlier, with significant increases in provisions against bad loans. VTB also reported growing bad loans.
Sberbank’s CFO, Taras Skvortsov, expressed confidence that the situation would stabilize, expecting improvement in portfolio quality as monetary policy loosens.
An analysis by Russian business news outlet RBC found that five of Russia’s 13 systemically important banks, including Credit Bank of Moscow, saw net profits drop by 20 percent or more in the first half of 2025. Nearly half of the country’s top 100 banks posted weaker financial results during this period.
“Very few companies can take in credit at such very high interest rates. And the same goes for households,” said Vasily Astrov, an economist at The Vienna Institute for International Economic Studies. Many corporate loans, he noted, were taken at floating exchange rates, forcing refinancing on unfavorable terms and creating financial stress.
