VTB’s net interest income slumped 49% to 146.8 billion rubles in the six months to June from a year earlier, according to a July 31 results presentation, the latest decline for its core credit operation.
Such a drop is rare among comparable lenders worldwide, and senior managers at the bank are signaling privately that the data don’t reflect the true seriousness of the situation, according to people familiar with the matter who requested anonymity discussing private matters.
The lending income slump underlines the challenges that Russia’s economy is facing as Putin and US President Donald Trump prepare for a summit in Alaska this week in search of a deal to end the war. The White House is increasing pressure on the Kremlin, with the latest moves including a doubling of tariffs on India as a penalty for its purchases of Russian oil.
Net interest income is the difference between the interest a bank earns on loans and pays on deposits. At a time when Russia’s official benchmark rate soared to a peak of 21%, the decline underscores the challenges facing the bank’s loan book.
The bank still posted a net profit of 280 billion rubles in the period, according to the results. That was aided by large gains in the trading of financial instruments, the data show, a factor which may not provide reliable returns in the long run.
VTB said its net interest income declined because the increase in interest rates from 7.5% to 21% was “so significant and so prolonged that it impacted NII so materially.”
It dismissed as “fantasy, plain and simple” that senior managers at the bank were privately signaling the data may not reflect the true seriousness of the situation. “We regularly conduct stress tests and all necessary business analysis, and we are absolutely positive,” a spokesperson said in an emailed response to questions.
Bloomberg reported in June that banking officials saw a credible risk of a systemic crisis in the next 12 months as lenders became increasingly concerned about the level of bad debt on their balance sheets. Asked about those fears as the Russian Central Bank cut interest rates to 18% last month, Governor Elvira Nabiullina insisted there was “no reason to worry.”
The Russian government has relied heavily on banks, especially state-owned ones like VTB, to help finance the war effort. Moscow mandated lenders to give preferential loans to enterprises linked to the military-industrial sector, many of which are difficult to account for in public statistics because of restrictions on the publication of data on war-related spending.
Massive increases in government spending on the war and measures to support businesses affected by international sanctions stoked spiraling inflation in Russia and prompted the central bank to hike interest rates to a record high 21% to cool the overheating economy. As interest rates rose, banks have seen a spike in the non-payment and restructuring of loans.
Nabiullina rejected the risk of a systemic crisis as “absolutely unfounded” at a financial conference last month, and pointed to capital reserves of 8 trillion rubles as evidence that Russia’s banking system is well insulated against shocks. The central bank has also said it could release what’s known as a macroprudential capital buffer, allowing banks to absorb losses and operate with temporarily lower capital ratios, if necessary.
Nabiullina has acted decisively to recapitalize failing lenders and clean up Russia’s banking system in the past. In 2017, the central bank spent at least 1 trillion rubles to rescue three large private banks, Otkritie, Promsvyazbank and B&N Bank, a move it said was necessary to save the financial system.
VTB is one of 13 major lenders considered systemically important by the central bank. Some senior VTB managers have privately pointed to the collapse in net interest income to air concerns that their loan book is in worse shape than other headline statistics imply, according to current and former officials and documents seen by Bloomberg.
Public data on VTB’s non-performing loans show some cause for concern but do not suggest any crisis is imminent. Its non-performing loan ratio stood at 4.1% at the end of June, a percentage point higher than a year earlier, signaling a relatively rapid increase that nonetheless sits lower than previous crisis periods.
VTB’s official cost of risk, a key indicator of credit quality, rose to 0.8% from 0.6% year-on-year, and for individuals it roughly doubled from 1.2%. Non-payment of loans from individuals was up 32% in the year to date. That all suggests the bank is having difficulties with the repayment of retail loans at a time when mortgage delinquencies in particular are known to be rising.
However, the officials have privately noted that when it comes to the corporate portfolio, loan restructurings and the lack of visibility on war-related debt means it is hard to get an accurate picture of the true state of the loan book.
They also noted the discrepancy between the falling interest income and its overall net profit figure, which was up 1.2% year-on-year in the six months to the end of June.
The half-year filings indicate its profits are coming from other strands like fee and commission income and trades, likely in currency, more volatile income streams than lending. That uncertainty was evidenced in its second-quarter profit for 2025, which dropped 10% year-on-year.
A 2022 rule means “banks cannot go after their assets in insolvent companies and have to continue issuing credit, masking the level of financial distress in the economy,” said Anders Olofsgård of the Stockholm Institute of Transition Economics, a leading research center on Russia’s economy. “It would be quite amazing and hard to believe for a bank’s profit to increase if their net interest income has plummeted by that much.”
VTB has also been operating with its capital ratios under pressure. In September 2024, Russian media reported that its core capital adequacy ratio fell to 5.31%, close to the regulatory minimum, giving it the lowest ratio of all major banks and prompting analysts to suggest it may need additional capitalization. It has since stabilized although its capital buffers remain historically thin. Bloomberg reported in July that several systemically-important banks were privately discussing how they may need to be bailed out or recapitalized.
The people also said the decline in VTB’s lending operation appears worse than at some of its major rivals. Sberbank, Russia’s largest bank, saw its net interest income rise 18.5% to 1.7 trillion rubles in the first half of 2025 compared to a year earlier, according to its IFRS filings published in July. Sberbank’s results show a rise in interest income over the last two years, a markedly better core performance than VTB.
In a press release accompanying its first-half report, VTB said its net interest income was “under pressure.” However it said its non-performing loan figure “remained low.” It said it was a “key beneficiary of monetary easing” and upgraded its profit forecast for 2025.
With assistance from Tom Metcalf.
This article was generated from an automated news agency feed without modifications to text.
