The unfolding economic crisis is bringing a new wave of problems to the Russian banking market. Smaller banks will be hardest hit and may soon be affected by a wave of bankruptcies, President of the Moscow Partners Investment Group, Yevgeny Kogan, said at the conference on Investing in Foreign Securities on St. Petersburg Exchange.
“I expect bank failures,” Yevgeny Kogan said. “Large banks might not go bankrupt, exactly, but they might change hands. As for smaller ones – yes, I think there will be another wave of problems.”
The main reason for bank failures will be large amounts of bad loans, both retail and corporate, that banks will inevitably face.
This is not just Russian banks’ problem – foreign financial and credit institutions are facing similar challenges. Since the beginning of this year, JP Morgan quotes fell by 37.2%; and Wells Fargo, by 55.3%. However, large foreign banks will receive support, Kogan says; they will survive.
“What is the main problem today? No one knows the exact scale of this disaster. Banks are always the first victims, and they will struggle with huge defaults, and it is impossible to estimate them at this stage,” the expert said.
That is why major investors are selling off bank shares. Their mood is also affected by the decreasing interest rates on deposits, which affects banks’ profitability.
“I expect a decrease in the profitability of the banking sector,” Yevgeny Kogan said.
The Central Bank began to vigorously revoke licenses from banks after the crisis in 2014, and their number has more than halved since then. At the beginning of 2020, Russia had 442 credit institutions, including 402 banks.
Earlier, a new wave of problems was predicted by head of the Accounts Chamber Alexei Kudrin who also said banks might need bailout packages again as soon as this summer and fall.