State banks dominate Russian banking sector

A total of 499 banks operated in Russia at the end of October. Despite the high number of bank businesses, the banking sector is highly concentrated and dominated by state-owned banks. The four largest state-owned banks have over 55 % of the banking sector’s total assets. In total, the assets of all state-controlled banks represent about two-thirds of the banking sector’s assets. Over the last two years, the state presence in the banking sector has increased as several large private banks failed and were taken over by the central bank. Alfa Bank, Russia’s largest private bank, controls about 4 % of the sector’s total assets.

However, state-controlled banks are a fairly heterogeneous group. For example, Sberbank, which is majority-owned by the central bank, is in a class by itself. Over half of Russian wages and pensions are paid out through Sberbank. The bank controls nearly half of the market share for household deposits and housing loans. Despite economic recession and sanctions, Sberbank’s operations have remained highly profitable. The other three giant state-owned banks (VTB, Gazprombank and especially agriculture bank Rosselkhozbank) have seen earnings strained by their large portfolios of non-performing loans. The government each year has pumped vast amounts of capital into the agriculture bank. This year, for example, it has set aside 40 billion rubles to support Rosselkhozbank.

In addition to commercial banks, government subsidies are granted to fund state development bank VEB. VEB is a 100 % state-owned institution tasked with supporting development of the Russian economy over the long term. VEB’s 3.385-trillion-ruble balance sheet is strained by non-performing loans and repayment of foreign currency loans. In the federal budgets of 2017—2019, 150 billion rubles annually have been earmarked for VEB support. Under the government’s latest plan, 900 billion rubles are budgeted for VEB recapitalisation and foreign debt repayment in 2019—2024.

Largest bank groups as of end-October 2018

Sources: banki.ru, Central Bank of Russia, BOFIT.