Russian banks play truth or dare
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Russian banks play truth or dare

During the past three years, Russian banks have plastered over holes in the corporate sector with record profits from retail. The choice now might be between fuelling a bubble or stagnation.

Overlooking central Moscow’s jumble of architectural relics this summer, Andrey Sizov says his industry might have reached a nadir: it is only up from here. It is a particular kind of optimism from the head of Aton Capital, the brokerage arm of one of the oldest investment companies in Russia.

In Sizov’s view, if fundamental changes to global prices in fixed income, currency and commodities entail a big devaluation of the rouble it might mean a longer-term rise in trading volumes in Russia. But some of Russia’s largest banks – the pillars of the system – might be among the biggest risks to the market, he says.

It speaks to the general lack of bravado in Moscow’s financial community this summer. A country from which hundreds of billions of dollars have departed in capital outflows over the past three years has now also faced falling external demand for its natural resources and, most recently, the prospect of pricier dollar credit.

Some observers hope that Russia’s emerging consumers can continue to drive high-margin lending, as well as M&A and stock market activity. But while banks’ desire to grow out of trouble has sparked a retail boom, it increasingly looks like a bubble.