In systemically important Russian bank, more than a quarter of corporate loans became problematic
Moscow Credit Bank (MCB), which is on the list of systemically important banks in Russia, had corporate loans totaling 671 billion rubles - about $8 billion - go problematic. This is more than 27% of its corporate loan portfolio, and the volume of such loans increased by 28% in the first half of the year alone.
This is evidenced by the bank's reporting, analyzed by Bloomberg.
MCB includes loans for which the bank sees an increased risk that the debt will not be repaid in full in the problematic category. A sharp increase in such a portfolio indicates a deterioration in the financial position of some corporate clients.
MCB was particularly active in lending to capital-intensive sectors of the Russian economy. Among its clients are enterprises in metallurgy, machine building, agriculture, and other major industrial sectors. In conditions of high interest rates, servicing debt has become significantly more expensive for such companies.
The bank itself, in its first-half reports, emphasizes improvements in other financial indicators. MCB's net profit increased 2.3 times to 15.6 billion rubles, net interest income rose by 32% to 55.3 billion rubles. The bank's equity as of end-June was 388.6 billion rubles, and total assets were about 4.7 trillion rubles.
Problem loans at MCB significantly exceed the Russian banking system average
The scale of problems in MCB's loan portfolio noticeably exceeds the average level in the Russian banking sector.
According to the Bank of Russia, the share of problematic corporate loans in the system at end-June was about 12%. A year earlier it was at 11.2%. At the same time, the share of risky restructured loans increased from 3.5% to 4.9%.
The regulator itself continues to insist that the Russian banking sector overall remains resilient and has sufficient capital buffers. At the same time, the Bank of Russia acknowledges deterioration in the financial position of certain highly leveraged companies and an increase in loan restructuring volumes.
Reuters previously reported on banking crisis risk
MCB's problems emerged against the background of broader loan quality deterioration in the Russian economy.
Reuters in July reported on an intelligence assessment prepared for European officials on the state of the Russian banking system. Its authors warned of the risk of an "explosive" banking crisis because Russian banks are taking on an increasing share of the burden associated with the war economy.
According to Reuters, banks in Russia were used to finance companies, including in the defense sector, through subsidized lending programs. At the same time, debt restructuring and state support allowed postponing the moment when the deterioration in borrowers' financial condition would fully reflect in bank reporting.
The intelligence report seen by Reuters noted that this model could create a semblance of a more resilient economy while accumulating risks within the banking system.
The Bank of Russia at the time disagreed with assessments of an imminent threat of a large-scale banking crisis.
High rates squeeze Russian companies
High debt servicing costs remain one of the main reasons for rising credit risks. To combat inflation, the Bank of Russia previously raised its key rate to a record 21%, then gradually lowered it to 14%.
Reuters also reported in June that the head of Russia's second-largest bank VTB, Andrei Kostin, allows for near-zero economic growth in Russia in 2026. Among the key reasons he cited were high borrowing costs and falling investment.
Against this backdrop, the Russian regulator encouraged banks to restructure loans of companies that temporarily cannot service debt under previous terms. This reduces the risk of a wave of immediate defaults, but at the same time may shift credit losses to the future.
MCB may be supported in case of worsening situation
MCB is on the list of systemically important credit institutions of the Bank of Russia. In total, banks from this list control about 80% of the assets of the Russian banking system.
According to Bloomberg, after large-scale personnel changes, MCB strengthened ties with structures related to Rosneft. Two sources familiar with the regulator's assessments consider Rosneft one of the potential sources of additional capital if the bank needs financial support.
As a last resort, the Bank of Russia could also intervene, a Bloomberg source noted. Bloomberg Economics economist Katerina Vlasova assesses MCB's problems as noticeable but still manageable, since the bank is too large for the regulator to allow it to fail without intervention.
