Russian banks’ losses narrow to $6.5 billion as of Nov. 1 -central bank

MOSCOW (Reuters) – Russian banks’ financial performance started improving in the third quarter, the Bank of Russia said on Thursday, but the sector is not out of the woods yet, with stress tests suggesting that further shocks could require additional capitalisation.

Several major Russian banks have been blocked from the international SWIFT payments system in response to Moscow’s actions in Ukraine.

Russian banks have also had to contend with reduced access to foreign currency, sharp interest rate moves and declining profits, although dominant lender Sberbank turning a profit from January-October was evidence of the sector’s resilience.

Russia’s banking sector loss narrowed to 400 billion roubles ($6.54 billion) as of Nov. 1 from 1.5 trillion roubles on July 1, the central bank said on Thursday, thanks in part to lower volatility and margin recovery.

Sanctions have clearly had an impact – Russian banks recorded record profits of 2.4 trillion roubles in 2021.

The central bank this week said it would revoke some support measures for Russian banks from Jan. 1. Among other things they will have to resume financial statement disclosure, though in a restricted format.

“In order to prevent the accumulation of systemic risks and maintain banking sector stability in the future, it is important revoke regulatory easing and move towards the restoration of capital buffers,” the bank said.

Stress tests suggest the banking sector is relatively stable, said the central bank, which expects banks to maintain a significant capital buffer in 2023 and have potential for around 40.7 trillion roubles worth of lending.

“However, some banks may need recapitalisation in the event of shocks: the total amount (of capitalisation) is estimated at up to 0.7 trillion roubles,” the bank said.

($1 = 61.2000 roubles)

(Reporting by Elena Fabrichnaya and Alexander Marrow; Editing by Kirsten Donovan)