Tough times ahead for Russian economy, CEO of Russia's largest bank warns

German Gref, CEO of Russia's largest bank, Sberbank, has said that the Russian economy is entering a period of serious challenges.

Source: The Moscow Times, an independent Amsterdam-based news outlet

Details: Gref warned at Sberbank’s AGM that the economic difficulties caused by military spending, inflation and high interest rates will persist into 2026.

He noted that the quality of the loan portfolio is deteriorating, with a growing number of requests for debt restructuring from both retail and corporate borrowers.

Meanwhile, Bloomberg has reported the risk of a banking crisis within the next 12 months, citing sources within banks’ senior management. The banking sector is accumulating defaults that are not yet reflected in the official statistics. Bloomberg said problem loans could reach RUB 3.7 trillion (about US$47.3 billion), equivalent to 20% of the banking system’s capital.

Total corporate debt has reached RUB 86.2 trillion (about US$1.1 trillion), up 65% compared to the start of the full-scale war. Nearly half of this debt is owed by Russia’s 78 largest companies. One in six of them spends over a third of profits on interest payments, while 8% of the total debt is owed by companies that cannot even cover their loan servicing costs.

Meanwhile, the economy is experiencing a rise in mutual non-payments between companies. In the industrial sector, these have surged by over 40% in just six months – the steepest rise since the Covid-19 pandemic.

Background:

• Russia is gradually exhausting its macroeconomic reserves, in particular the Russian National Wealth Fund (NWF), but it still has the potential to continue financing the war.
• The Kremlin has plans to cut defence spending, which has reached its highest level as a proportion of the national budget since the Soviet era.

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