- Top executives at some of Russia's biggest banks have privately discussed seeking a state-funded bailout if the level of bad loans on their books continues to worsen over the next year.
- The banks' assessment of the quality of their loan books is far worse than what official data show, according to current and former officials and documents.
- Central bank Governor Elvira Nabiullina has downplayed the risk of a systemic crisis, saying Russia's banking system was "well capitalized" and had capital reserves of 8 trillion rubles.
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At least three lenders identified as systemically important by the Bank of Russia have considered the possibility that they may need to be recapitalized in the next 12 months, according to current and former officials and documents reviewed by Bloomberg News.
The banks have discussed internally how they would raise the prospect of a bailout with the central bank should that become necessary. The scenario arises because their assessment of the quality of their loan books is far worse than what official data show, according to the people and documents.
The people, granted anonymity to disclose information that isn’t public, said any bailout request was dependent on a continued rise in the volume of bad loans over the next year. Still, they said the discussions were becoming more urgent throughout the banking industry.
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On paper the banking system is in relatively good health, with profits robust even amid a rise in so-called non-performing loans to companies and households with the central bank’s key interest rate at a near-record high 20%. Officially, levels of bad debt remain well below those recorded in past financial crunches and that were defused by the Russian authorities.
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Officially, the share of bad-quality loans to corporate borrowers stood at 4% as of April 1, while the proportion of unsecured consumer debt in arrears of 90 days or more was at 10.5%.
Still, top bankers have begun to raise the alarm about the prospects for the next year.
"It is already clear that it will not be easy,” Herman Gref, chief executive officer of state-owned Sberbank, Russia’s largest lender, said of the prospects for the next year at the annual shareholders meeting last month, because loan portfolio quality is deteriorating with companies increasingly needing to restructure their debts. “I hope, as always, we will be able to find joint plans to get through these difficult times,” he added.
At VTB, Russia’s second-largest lender, the share of non-performing loans from individuals in its retail portfolio reached 5% in May, amounting to 377 billion rubles, the bank’s First Deputy Chairman Dmitriy Pianov said, Vedomosti newspaper reported July 1.
That indicator has risen by 1.2 percentage points since the beginning of the year. The share of bad loans could hit 6%-7% by 2026, Pianov said, though he also noted this was below the peak of 8%-10% seen in 2014-16.
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Russia has used bailouts and other mechanisms to recapitalize failing banks in the past. In 2017, the central bank spent at least 1 trillion rubles to rescue three large private banks, Otkritie, Promsvyazbank and B&N Bank, a move it said was necessary to save the financial system.
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