While most large Russian banks have managed to hold onto their position relative to each other, they have all suffered significant falls in Tier 1 capital and profits as they find themselves challenged by currency depreciation and difficult market conditions. Written by Matthew Karwacki, research by Valeria Yakutovich.

As The Banker reported in last year’s Top 100 Russian banks ranking, 2014 was one of the most challenging years in the recent past for Russia’s lenders. The country's banking sector was squeezed by the tumbling rouble as well as international sanctions and this year’s ranking reflects that – the total profits of Russia’s top 100 banks slumped to $6.52bn, down from $26.9bn the year before. Similarly, Tier 1 capital dropped to $98.65bn; it was $132.75bn at the end of 2013.

The drastic drop in profitability translated into a much lower return on capital (ROC), which dropped to 6.61% from 20.3% in 2013.

Russian banks ranking

Little movement at the top 

Large gains are unlikely in such an environment so there was little movement in the country’s top 10. Sberbank still sits at the top of the ranking with $35.69bn in Tier 1 capital. Although this marks a 34.7% drop over the 2013 results, the lender still enjoys a comfortable lead over the closest runner-up, VTB Bank, which holds $17.54bn in Tier 1 capital.

The highest mover in the top 10 was Alfa Bank. In dollar terms, Tier 1 capital at the bank dropped only by 10%, outperforming all other top 10 banks. This helped Alfa Bank edge up one spot, to fourth. According to Moody’s, this increase in capital was supported mainly by its retained earnings, although the agency was quick to add that the quality of capital was somewhat impaired by the concentration of related-party loans.

Another move was UniCredit’s overtaking of Société Générale’s subsidiary, Rosbank, to reach seventh place, making it the largest foreign-owned bank in the country. The Italian bank was also able to guard its total assets and pre-tax profits against depreciation better than its French peer.

Top 10 foreign-owned subsidiaries in Russia

Silver lining 

One of this year’s biggest leaps came from B&N Bank, which is emerging as one of the winners of Russia's crisis. The bank was one of this year’s biggest movers as it climbed 15 positions, securing the 17th spot in the ranking. This was accomplished through a series of acquisitions of smaller banks, including Moscomprivatbank and DNB Russia. The lender is poised to keep on expanding after the acquisition of banks owned by Rost Group and Uralprivatbank in 2015.

B&N Bank’s progress shows that the largest Russian lenders could be poised to benefit from the flurry of consolidations that is sweeping across Russia. 

Since Elvira Nabiullina was appointed the head of the central bank in June 2013, the number of banks in the country dwindled to about 720 from 900. The consolidation is set to continue – according to Herman Gref, the CEO of Sberbank, 10% of the banks operating in Russia could lose their licences in the coming year. 

A notable performance was put in by Tinkoff Credit Systems. The bank, which specialises in providing retail services, earned an ROA of 4.5% (the highest among Russian banks) and an ROC of 24.67%. In last year’s ranking, the bank managed an impressive leap to 27th place, up 49 positions, a feat it did not come close to matching this year. However, it is still going strong; according to Fitch ratings it was the only moderately profitable retail bank in Russia at the end of November.

Top 10 Russian banks return on capital

Funding question

One of the unique characteristics of banking in Russia is that the local banks are often very reliant on interbank markets for funding. Loan-to-deposit (LTD) ratios at the largest banks are frequently well in excess of 100%, with some being many times that level.

The highest LTD ratio belongs to the National Reserve Bank, 520.77%, which is followed by Bank Severo Vostochny Alliance, where the LTD ratio is 475.86%. Some of the top banks also have high LTD ratios: Russian Agricultural Bank has a ratio of 203.87%, at Alfa Bank the ratio is 138.25% and at VTB Bank it is 137.42%.

With the current sanctions, reliance on the interbank markets could be a challenge in Russia if the bank depends on funding in a foreign currency, although so far the central bank has shrewdly helped the banks to maintain foreign exchange liquidity through the use of FX auctions and repo facilities.

The Banker's Russian banks ranking, 2016 originally appeared in the February 2016 issue of the magazine. The full results of the ranking are available on The Banker DatabaseFind out more about the database, register for a free trial or subscribe today.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter