Bank profitability improved in Russia, even with a decline in corporate borrowing

Figures from the Central Bank of Russia show total banking sector assets nominally declined last year by 3.5 %. If ruble appreciation is considered, total assets were up nearly 2 % from end-2015. Much of the decline reflected a 10 % reduction in the corporate credit stock and corporate deposits. When exchange rate shifts are considered, the corporate loan stock shrank about 4 %. The stock of credit granted to households increased by over 1 %. Given that the stock of household credit contracted 7 % in 2015, the improved performance is rather modest.

The stock of non-performing loans (NPLs) relative to the entire stock of corporate loans still exceeded 6 %. For household credit, the NPL ratio was about 8 %. In recent months, the share of NPLs has begun to shrink. The total 2016 profits of the banking sector rose to 930 billion rubles ($15 billion), a five-fold increase from 2015. The large state-controlled banks – Sberbank, VTB and Gazprombank – generated over half of the sector's profits.

The CBR has proceeded systematically with efforts to shut down or merge the banking sector's sick banks and go after banks that fail to comply with banking supervision requirements. It is not at all unusual that the audits during bankruptcy proceedings of banks that have lost their licences reveal a wide variety of misdemeanours and felonies. At the beginning of 2017, Russia had 623 active credit institutions, of which 205 banks held general banking licenses. There were 733 credit institutions a year earlier. Four credit institutions had their licenses cancelled in January.