Russian banks’ hidden losses
On paper, Russia’s banking sector is ticking over just fine. Results are strong and this year the sector could once again set new record profits. But don’t be fooled. The proportion of bad debt is increasing — and the Central Bank is letting banks skimp on
Russian banks are presenting a deceptive facade of financial health. Despite strong results and the potential to set new record profits this year, a troubling trend is emerging. The Central Bank has been allowing banks to avoid setting aside reserves for a significant portion of their troubled loans, creating a false sense of stability.
This approach enables banks to record impressive earnings now, before acknowledging the impending losses on non-performing loans or setting aside funds to cover them. The situation is a short-term illusion, with the inevitable losses bound to be recognized eventually. While Russian banks made an astounding 3.7 trillion rubles ($46 billion) in the first nine months of the year, a new report reveals that non-performing corporate loans have surged from 6.1 trillion rubles ($75 billion) to 7.2 trillion rubles ($90 billion) over the past month, accounting for approximately 70% of the sector's entire capital buffer.
In essence, record profits and escalating bad debts are two faces of the same financial coin, obscuring the true state of the banking system.
Written by urgent.news from The Bell's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
