Background
Over the period under review the Russian economy expanded although the GDP growth decreased from 4.5% in 2024 Q4 to 1.4% in 2025 Q1. Tight monetary policy pursued by the Bank of Russia helped slow down the growth of lending, signs of disinflation appeared. External conditions remained challenging: unfriendly countries enacted additional sanctions, amid the extensive tariffs announced by the USA in early April the volatility in global markets spilled over into the Russian stock market as well. Trade wars may have a negative impact on the Russian economy, primarily through lower prices for crude oil and other commodities.
The configuration of vulnerabilities in the Russian financial sector has remained largely unchanged. The Bank of Russia is closely monitoring changes in the quality of the corporate loan portfolio. An upward trend in the number of companies facing debt servicing problems was mostly typical of small and micro businesses, the increase in the number of restructured loans among large and medium-sized enterprises at the end of March was temporary. Credit risks are materialising in retail lending due to a deterioration of borrowers’ risk profiles and a slower expansion of the portfolio. Nonetheless, the ratio of problem loans is considerably lower than in
A combination of monetary and macroprudential policy measures pursued by the Bank of Russia will help preserve macroeconomic stability and the financial system’s resilience. Macroeconomic stability also depends on fiscal sustainability. The fiscal rule and coordination of its parameters with predominant average level of future oil prices are important components of this resilience.
In 2024 Q4—2025 Q1, the West continued to enact sanctions against various industries of the Russian economy as well as a number of individuals and legal entities, including from friendly countries. The new restrictions targeted the oil and gas sector, coal production, the defence industrial complex, the shipping industry, and oilfield service companies.
As of the end of 2024, companies’ balanced financial results dropped by 6.9% year on year (YoY) to ₽30.4 trillion, with the number of profitable companies declining in the majority of the industries. Sanctions, increased input costs, higher interest expenses amid tight monetary policy, as well as a certain deceleration of economic activity after its rapid growth weigh on businesses’ financial standing.
The aggregate net debt/EBITDA ratio for the largest Russian companies increased by 0.1 over the 12 months of 2024 and amounted to 1.6 as of the beginning of 2025. Problem companies account for approximately 8% of the sample’s debt (vs 5% as of the end of 2023). Corporate sectors’ sensitivity to high rates increased, but in general companies remain financially resilient.
Vulnerabilities of the Russian financial sector
Banks’ lending to corporate sector started to slow down in December 2024, with its growth rate turning negative in January—February 2025, which was attributed to transitory factors, namely higher public expenditures and loan repayments. In March—April 2025, the monthly growth rate of lending increased. This year corporate lending will maintain the trajectory of a balanced growth without risks of credit crunch.
In 2024 Q4—2025 Q1, the increase in debt liabilities to the banking sector was for the most part (nearly 64%) accounted for by large non-financial companies, part of which is highly leveraged. To limit the rise in the corporate sector’s debt burden and reduce systemic risks in lending, beginning on 1 April 2025, macroprudential risk-weight add-ons at the rate of 20% are applied to the increase in credit claims on large highly leveraged corporate borrowers.
A certain decrease in companies’ creditworthiness resulted in higher amount of loans restructurings in March 2025. The credit quality declined most notably among small and micro businesses, but these companies account for a small part of the loan portfolio (less than 1.5%). According to near real-time data of the largest banks’ risk management units, the proportion of loans to medium-sized and large companies included by banks in the green zone (companies facing no problems in the course of doing business) is 75% (declined from 78% as of 1 October 2024).
Default rate of small and medium-sized enterprises within the next 12 months from the reporting date, %
Variable rate loans account for a significant share in the corporate portfolio (65% as of 1 April 2025), increasing by 20 pp since the beginning of 2023. Normally, variable rate loans have been issued to financially resilient borrowers, and the quality of such loans is still better. Nevertheless, banks should carefully assess a borrower’s creditworthiness in the scenario of higher for longer rates.
Tight monetary and macroprudential policies pursued by the Bank of Russia and a decrease in banks’ risk appetite due to deterioration of loan servicing quality contributed to deceleration of consumer lending: unsecured consumer loans portfolio contracted by 1.4% in 2025 Q1. Amid these conditions and due to an outrunning increase in household incomes the share of households’ income used to service their loans decreased to 10.1% at the end of 2025 Q1 (vs 11.3% as of 1 April 2024).
Credit risks materialised in the segment of unsecured consumer lending: increased share of overdue loans was driven by a deterioration of servicing quality of loans issues from the end of 2023. During that period, until mid-2024, banks actively expanded lending at high rates and such loans were taken out by less creditworthy borrowers. The highest share of problem loans is typical for clients with high debt service to income ratio (DSTI), therefore in the absence of the preventive macroprudential measures the deterioration of the loan portfolio quality would have been even more significant. The share of loans issued to borrowers with DSTI above 50% contracted to 24% of the overall amount of unsecured consumer loans in 2025 Q1 (-9.8 pp YoY). To cover additional losses in case of stress, banks accumulated significant macroprudential capital buffer which covers 7% of the unsecured consumer loans portfolio.
Credit quality of issued cash loans, %
The mortgage lending slowed down in 2024 Q4—2025 Q1 amid the termination of the large-scale Subsidised Mortgage programme from 1 July 2024 and the rising market rates. The growth rate of mortgage portfolio in March 2025 and April 2025 amounted to 0.3% MoM and 0.5% MoM, respectively.
The decision of the Bank of Russia to set high macroprudential add-ons from 1 April 2024 helped substantially enhance mortgage lending standards. The share of mortgages in the primary and secondary housing market segments issued to borrowers with DSTI exceeding 80% contracted from 27% in 2024 Q1 to 3% in 2025 Q1 and from 36% to 12% respectively. Meanwhile, the quality of mortgage loans servicing deteriorated due to the increase in delinquencies of mortgages issued in 2023 H2—early 2024, when lending standards remained weak and borrowers rushed to take out a mortgage before the termination of the large-scale Subsidised Mortgage programme. The share of loans overdue for more than 90 days reached 0.9% as of 1 April 2025 (vs 0.5% a year before). Banks accumulated sufficient macroprudential capital buffer to cover possible losses on mortgage loans (1.8% of the portfolio as of 1 April 2025).
Share of high-risk segments in mortgage loans issues, %
The rise in new housing prices slowed down. According to Rosstat the annualized price growth in 2024 Q1-Q3 and in 2024 Q4—2025 Q1 amounted to 9.6% and 7.3%, respectively. Nonetheless, imbalances in the housing market persist, more specifically, the gap between primary and secondary housing market prices is still large (52% according to SberIndex and 60% according to Rosstat in 2025 Q1).
The average monthly sales of new housing (in square metres) decreased less than the issued mortgages. In 2025 Q1, the sales decreased by 8% YoY in terms of volume and increased by 9% YoY in terms of value. The share of mortgages in the sales structure declined, while the share of sales in instalments from developers and using buyers own funds increased. However, instalment plans carry risks for both buyers and construction companies. Construction companies could be affected by the slower increase in escrow account balances compared to mortgages and one-time payments. Buyers, that plan to take out a mortgage at the end of the instalment period, might face high monthly payments or bank’s refusals to issue a mortgage. In the worst-case scenario a buyer might lose part of the funds paid under the shared construction participation agreements. The Bank of Russia recommends that credit institutions engaged in project financing monitor the provision of instalment plans by the developers and, in case of risky practices, take this into account when forming loan loss provisions. In the future the Bank of Russia will include this recommendation directly in the regulation of provisions.
The Russian FX market adapted to the US sanctions against the Russian financial sector that were expanded in November 2024 quite quickly. The ruble started to appreciate as early as the beginning of December 2024, and this trend strengthened in 2025 Q1. This appreciation took place amid the US Dollar Index (DXY) decline to other currencies and was driven by the outrunning reduction in imports compared to exports, as well as by the elevated demand for ruble assets encouraged by high interest rates. Given the balanced banks’ FX positions the ruble appreciation caused only minimal losses in the banking sector (approximately 1% of banks’ capital).
During the reporting period, the trend towards dedollarisation of banks’ balances continued. The share of foreign currency corporate loans declined from 14% to 12%, the share of foreign currency liabilities to corporate clients and individuals decreased from 17% to 16% and from 7% to 6%, respectively (at a fixed rate as of 31 March 2025). The situation with the FX liquidity was favourable and allowed the Bank of Russia to decrease CNY/RUB FX swaps limit to ¥5 billion in 2025 Q1.
Despite an outstripping growth in the cost of funding at the end of 2024, the banking sector margin remains high. The net interest margin (NIM) across all banks declined only slightly from 4.4% in 2024 Q3 to 4.2% in 2025 Q1.
However, the situation is uneven across the sector. Approximately 18% of banks (accounting for 42% of the sector’s assets) operate with narrower margin, their NIM declined over the said period from 2.0% to 1.1%. It is critical for banks to enhance the quality of their interest rate risk assessment, factor in the results of stress testing in scenarios with different interest rate paths when developing credit products, and prevent the transformation of interest rate risk into credit risk when lending at floating rates.
Interest rate risk of the bond portfolio decreased in the reporting period. A decline in bond yields that began in December 2024 led to the positive revaluation of the banking sector’s ruble bond portfolio in 2024 Q4—2025 Q1 amounted to ₽71 billion and the reduction of the unrecognised negative revaluation of the portfolio of held-to-maturity securities by ₽101 billion.
Accumulated but unrecognised revaluation (for HTM portfolio) and negative revaluation of trading portfolio (cumulative), ₽ billion
Assessment of the financial sector’s resilience
The banking sector remains resilient overall. Despite a slight decline in the interest margin, returns on banks’ assets stay close to 1.9% owing to the positive revaluation of securities, increased operating earnings, and the reserves remaining at the previous year’s level. Banks’ capital adequacy ratio recovered to the historical averages (13.0% as of 1 April 2025 vs 12.1% as of 1 October 2024 and the average of 12.7% recorded since 2014) as a result of high returns and a slower expansion of the loan portfolio. The capital buffer increased from 4.5 pp to 4.7 pp of the N1.0, including the requirements to comply with the add-ons, and from 5.2 pp to 5.6 pp taking into account the accumulated macroprudential buffer. Nonetheless, dividend payments by banks will put some pressure on capital adequacy (the simultaneous effect of the dividend payments from 2020 to 2024 approximated −0.5 pp of the banking sector’s N1.0). The increase in the rate of the countercyclical buffer to 0.5% from 1 July 2025 will contribute to supporting banks’ resilience and will not have a considerable effect on banks’ lending potential.
The situation with banks’ regulatory liquidity has improved since the beginning of the year. After the Bank of Russia loosened the schedule for phasing out the easing measures related to the liquidity coverage ratio (LCR) and increased flexibility for systemically important banks (SIBs) to comply with the LCR, the influence of the LCR requirements on banking product pricing weakened: the spread between banks’ deposit rates and the Bank of Russia key rate narrowed in the retail segment as well and, from February 2025, became negative again (-1.4 pp in the first ten days of May). Beginning on 1 July 2025, SIBs are to maintain the LCR calculated without an irrevocable credit line (ICL) at a level of at least 60% (currently, it is 50%). This scheduled increase will have a limited impact on monetary conditions, taking into account the growth in the largest banks’ actual LCRs.
In 2024, NBFI segment demonstrated high growth rate, which, in many sectors, exceeded that of the banking sector. The fastest growing sectors were UIFs, microfinance companies and brokers. Assets of insurers and NPFs showed strong dynamics due to the development of endowment plans and the long-term savings programme. On the contrary, growth of leasing assets slowed down. Leasing companies traditionally operate in sectors, which are more sensitive to reduction in economic growth, which resulted in them already documenting rise of non-performing debt (by 1.8 pp, up to 7.3% of leasing portfolio as of 1 April 2025) and seized assets on the balance.
Adaptation of institutional investors to interest rate risk (increasing of deposits and reduction of volume and duration of trade book upon reinvestment of the gains from redemptions) allowed them to regain profitability of assets at the 2024 year-end. Possible increase of credit risks in the economy will only slightly impact insurers and NPFs due to the high quality of their assets.