More Russian banks need bailout - October 08, 2017

More Russian banks need bailout

Another Russian bank needs a bailout just weeks after another major provider needed help to stay afloat. Last month, we also wrote about the serious problems local banks may face.

Banks are having a hard time in Russia as more and more major participant needs the government’s help to remain in business. In the meanwhile, authorities continue revoking the licenses.

B&N seeks help

According to Reuters, B&N Bank, Russia’s 12th biggest lender by assets asked the local central bank for help. The Central Bank confirmed that B&N indeed needed support and that they helped the bank with an “emergency cash injection”.

The journal writes that “there was no immediate sign of contagion” and “only a few [lenders] were vulnerable and the risk of a wider crisis is small”. As B&N is not a systematically important lender, the banking sector may not face serious consequences for now.

Another bailout

What makes the situation worse, though, is that this happened just three weeks after another major participant needed help from the Russian state. Otkritie had to be saved after having lost a quarter of its deposits in two months. This loss totalled up to $7.4 billion and happened after the bank’s ratings got downgraded.

Otkritie was once the biggest bank of Russia and what’s more important, it is a systematically important lender. Saving it was rather important for the whole country’s banking system. Now the owners and the state will try to “ensure continuity of its activities”, according to Bloomberg.

The partially churched-owned Peresvet also needed to be saved earlier this year by Russian Development Bank.

Other problems

Just weeks ago, we also wrote about the serious problems Russian banks have. Local authorities are extending the review of bank licences, because of the high number of frauds, poor asset quality and high risk. Between 2013 and 2019 the number of Russian banks are expected to be halved.

This costs billions to Russia. Plugging the financial holes of banks with revoked licences consumed $10 billion just last year. Reuters believes that “Russian banks were already under stress from an economic slowdown made worse by Western sanctions. They have seen bad debts rise over the past three years.”

Against all the problems in the banking sector, the rouble is stable since the beginning of August and the stock market went up by 10% in the last two months. The banks, however, still hold a certain amount of risk and low predictability.

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