Of the Russian banks in this year's rankings, two stand out for the right reasons: Alfa Bank and Bank Vozrozhdenie. They enjoyed real profits growth in 2008 of 30.2% and 19.5%, respectively.

In Alfa Bank's case, the performance confirms the benefits of its status as the country's largest private bank, and of its highly experienced management team that includes Western-trained executives in key board positions such as risk management and investment banking. By contrast, Bank Vozrozhdenie's results suggest that it may be one of the few banks in Russia that has managed to achieve rapid growth without overstretching its risk management capabilities. The pan-Russian retail and commercial bank entered the Top 1000 for the first time last year but despite its ambitious growth plans, Vozrozhdenie has evidently suffered less than many competitors from the financial market disruptions and the fall in oil and real estate prices in the second half of 2008.

The rest of the rankings make for rather more unpleasant reading as loan loss provisions began to rise in the final quarter of 2008 and wholesale funding dried up. Gazprombank tops the table of profit declines with a huge 2008 annual loss resulting from the sharp decline in the value of its securities portfolio.

The continued closure of international capital markets to most Russian borrowers, even after flows have begun to recover in developed markets, is a dominant theme of 2009. Part of the reason for the reluctance to invest in Russian banks is uncertainty over the trajectory of non-performing loans (NPLs). Very few banks disclosed this information, but those that did showed NPL rates doubling from 2007 in many cases - and the economic recession only started in the final two months of 2008, suggesting more pain is due. To overcome the challenges ahead without access to capital markets, solid deposit funding will remain vital. But the picture varies widely, as does banks' willingness to provide this important data.

Sberbank retains by far the largest share of Russia's deposits, and its loan-to-deposit ratio is less than 100%, but there are other banks that have also played it safe. Gazprombank's low figure is less revealing in view of its financial market exposure, and Vozrozhdenie once again shows up as a comparative safe haven.

At the other end of the scale, state-owned Rosselkhozbank (Russian Agricultural Bank) and VTB have very high loan-to-deposit ratios, but these pose less of a threat in view of their government backing. Both have also been encouraged by their dominant shareholder to continue lending for macroeconomic reasons. Consequently, the privately owned credit card specialist Russian Standard appears the most exposed from a funding viewpoint.

Top Russian Banks Profit Declines ($M)

Top Russian Banks Profit Declines ($M)

Selected Russian Banks\' Loan-To-Deposit Ratios (%) 2008

Selected Russian Banks' Loan-To-Deposit Ratios (%) 2008

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