Financial difficulties at some of Russia’s largest institutions and a contracting banking sector have led The Banker to shorten its ranking of the country's banks from 100 to 50. However, there have been some positive developments, such as an increase in capitalisation. Stefanie Linhardt reports.

In 2017, the Russian banking sector has faced some upheaval. Not only from the well-known challenges posed by digitalisation and tech disruptors, but also because of financial difficulties at some of the country’s largest banks.

To accommodate for a contracting Russian banking sector, which saw Jugra Bank among others collapse in 2017 (which on year-end 2016 data would have been the 28th largest bank by assets), The Banker has made the decision to shorten its ranking from the country’s top 100 banks by Tier 1 capital to only 50.

Otkritie Financial Corporation, Russia’s fourth largest bank by assets and fifth largest by Tier 1 capital based on year-end 2016 financial data, required financial assistance in August. This was provided by the only recently established Banking Sector Consolidation Fund of the country’s central bank, Bank of Russia. Later in the year, Promsvyazbank (eighth by assets and 12th by capitalisation) and B&N Bank (10th by assets and 13th by capitalisation) suffered the same fate. Otkritie and Promsvyazbank are both on the list of Bank of Russia’s systemically important credit institutions.

According to year-end 2016 data, Otkritie, Promsvyazbank and B&N Bank already had comparatively low capital-to-assets ratios and are ranked 38th, 39th and 40th of the Top 50 Russian banks by capitalisation, respectively. All three banks are now effectively state-owned.

Some good news

Nevertheless, there have also been some positive developments. All but three of the top 50 Russian banks increased their capitalisation compared with the previous ranking, although this was partly due to a favourable currency climate: the rouble was 16.77% stronger against the US dollar than in the previous ranking. All of The Banker’s rankings are based on US dollars to allow for better comparability across countries.

At the top of the ranking, as in previous years, is state-owned Sberbank, which has more than double the capitalisation and assets of second placed VTB Bank. There is no movement in the top five by Tier 1 capital.

Russian Regional Development Bank (RRDB) has climbed 45 places, making it the 11th largest Russian bank by capitalisation. This follows an Rbs88bn ($1.54bn) injection of new capital by the bank’s controlling parent company, oil giant Rosneft, in December 2016. RRDB’s assets at the end of 2016 ($5.07bn) put it in 22nd place, but the bank anticipates substantial business and credit expansion over the next few years, according to a report by rating agency Moody’s.

Tinkoff Bank, established as a credit card lender in 2006, has since broadened its business and fully embraces digitalisation under its technologically advanced branchless business model. It rises four places to 24th by Tier 1 capital, while its efficient operations also make it the most profitable bank, with return on assets of 8.3%, and second only to Sovcombank by return on capital.

Among the institutions with the highest return on assets, places five to 10 are all taken by foreign-owned subsidiary banks, with Netherlands-headquartered Home Credit and Finance Bank leading the pack.

UniCredit Bank Russia is the highest ranked bank among foreign-owned subsidiaries with $2.67bn equivalent of Tier 1 capital. The Italian-owned bank has also increased its position in the overall ranking by one place to sixth. The second largest foreign owned lender, Rosbank, a subsidiary of Société Générale, holds on to eighth place, with Raiffeisen Bank Russia climbing two places to ninth overall thanks to a 48% increase in Tier 1 capital.

Top 50 Russian banks


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