Banking sector conditions stabilise in Russia

With the invasion of Ukraine in February 2022, fears of new sanctions and increased general censorship have caused a scarcity in data on banking sector activity. The CBR’s monthly releases currently only cover a few key indicators for the sector as a whole. The available data suggest that Russia has avoided a widespread financial crisis and that conditions in the banking sector are stabilising. The impacts of war, sanctions, a yoyoing key rate and general economic uncertainty reduced bank lending activity in the March-May period. The stock of corporate loans stopped shrinking in June, thanks largely to subsidy programmes for large, systemically important firms. The slight growth in the housing loan market has helped reboot household lending in June.

Rates on new loans have fallen because of the CBR’s rate-cutting, which began in April, as well as government subsidy programmes. The stabilisation of financial markets has also made conditions more conducive for borrowers. A June survey on bank lending found that terms for household loans had relaxed considerably from March. There was still no strong sign of a revival in credit demand, however, and household savings appear to have risen further in May and June. Household savings deposits were up by 6 % y-o-y in June.

Although the CBR no longer releases information on bank financial performance, observers say that the first six months of this year were extremely challenging for banks focused on serving households. Corporate lending, in contrast, relies more on variable-rate loans that help banks protect their margins.