Putting the age of bailouts behind it, Russia’s banking sector is showing steady – if not stellar – growth, according to The Banker’s Top 50 ranking. James King reports.

Russia’s economy has remained resilient in recent years, despite contending with a range of external pressures including oil price volatility, Western sanctions and trade tensions. Though the country’s economic potential has lessened as a consequence, gross domestic product has ticked along, in relative terms, reasonably well.

In 2016 it hit 1.6%, before climbing to 2.3% over the 2018 review period for The Banker’s Top 50 Russian banks ranking. This performance is in part thanks to the work of the Russian authorities, who have implemented a set of macroeconomic policies that has generated praise from the International Monetary Fund.

This stable, if unspectacular, economic backdrop has also assisted the country’s banks, after a period in which a number of Russian lenders required bailouts. The wider banking system’s aggregate return on assets (ROA) and return on equity both expanded in 2018. Though these positive numbers were largely driven by the performance of Russia’s biggest lenders, it nevertheless points to a more positive direction of travel for the sector. 

Indeed, some standout growth stories have emerged from among the upper tier of the country’s banking institutions. Tinkoff Bank, for example, which comes in at 16th place in the main ranking, also tops the ROA table with 7.22%. This performance came despite total assets growth of 15.8% over the review period. 

Foreign banks thrive

Meanwhile, Novikombank, in 23rd place in the main ranking, also enjoyed a stellar period of profitability in the review period. The lender’s ROA reached 4.5%, placing it in second position based on this metric, while its return on capital (ROC) was 66.9%, the highest in The Banker’s ranking. The lender also boasted the lowest cost-to-income ratio among all Russian banks with a figure of 26.5%. 

Foreign banks in Russia have continued to perform well. Despite in some cases registering a marginal decline in Tier 1 capital, they once again feature prominently among the best-performing institutions in the country. The largest foreign-owned subsidiary in Russia based on Tier 1 capital, UniCredit, features in fourth place by cost-to-income ratio (33.1%) and ninth in the loan-to-deposit ranking (101.8%). 

Meanwhile, Raiffeisen Bank Russia, the third largest foreign-owned subsidiary in the country, features among the top 10 banks by ROA, ROC and cost-to-income ratio. The only other lender to achieve the same feat is Russia’s Renaissance Credit, which also makes it into the top 10 banks by loan-to-deposit ratio. Elsewhere, Dutch-owned Home Credit and Finance Bank also features in the top 10 tables for ROA and ROC. 

Operational change

Demonstrating the improving operational efficiency of Russia’s largest banks, six of the country’s 10 largest institutions are among the leading lenders by cost-to-income ratio. Sberbank, Russia’s largest bank, secures third place in the cost-to-income table with 31.3%. VTB Bank, the second biggest bank by Tier 1 capital, rounds out the top 10 with a cost-to-income ratio of 37.6%. Cumulatively, these cost-to-income ratio metrics point to the ability of Russia’s lenders to adapt to the more complex operating environment in which they have found themselves over the past decade. 

In the overall Top 50 banks ranking, very little change is registered among the 10 largest lenders by Tier 1 capital. The notable exception is the jump made by Okritie Financial Corporation Bank, which rises to sixth place from 11th in the previous ranking. This follows an extensive clean-up operation of the bank’s balance sheet, following its bailout by the central bank in 2017. The lender successfully completed a merger with B&N Bank in January 2019, another institution that was rescued by the central bank. 

In terms of Tier 1 capital growth among the 10 largest banks, there were mixed results. Alfa Bank, Russian Agricultural Bank, Raiffeisen Bank Russia and Okritie Financial Corporation Bank all posted gains to Tier 1 capital, while the remaining six institutions registered declines. Similarly, in terms of asset growth, only Alfa Bank and Raiffeisen Bank recorded increases to their positions. 

Russian banks


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