The condition of loan portfolios in Russia's largest banks raises concerns that could lead to requests for government support.
Condition of Loan Portfolios
Top executives at at least three systemically important banks in Russia have discussed scenarios in which they may need to be recapitalized over the next year. Insiders claim the actual condition of loan portfolios is significantly worse than official figures suggest.
Central Bank's Assessment
The Central Bank of Russia reports that only 4% of corporate loans and 10.5% of unsecured consumer loans are classified as troubled. However, sources contend these figures are understated to mask the true level of troubled assets. The central bank emphasizes restructuring credit agreements instead of classifying them as non-performing.
Credit Quality at Sberbank and VTB
Executives at Sberbank and VTB acknowledge a decline in loan quality. For instance, distressed mortgage loans at Sberbank increased by 90% in just three months, totaling 285 billion rubles. VTB is also aware of an increase in the share of troubled loans, which they project could reach 6-7% by 2026.
The state of Russia's banking sector requires close attention as the growing number of troubled loans may necessitate government support.
