Sharp Decline in Revenues and Alarming Signals
Russia’s second-largest bank — VTB (VTB Bank PJSC) — is experiencing a steep drop in lending income, raising concerns among top managers and experts amid ongoing economic pressure from President Vladimir Putin’s war against Ukraine.
According to financial results published on July 31, the bank’s net interest income for the first six months of 2025 fell by 49% to 146.8 billion rubles (about $1.9 billion) compared with the same period last year. Bloomberg notes that such a decline is extremely rare among global peers.
Sources familiar with the matter told the agency that internal concerns at VTB suggest the official figures do not fully reflect the real severity of the situation. Net interest income — the difference between the interest earned on loans and that paid on deposits — has come under serious pressure due to the rise in Russia’s key rate from 7.5% to 21%.
War Pressure and Rising Bad Loans
The state has been actively using banks — especially state-owned institutions like VTB — to finance war needs. Preferential loans to enterprises in the defense sector have become mandatory, while secrecy over official data makes it impossible to fully assess the volume of war-related debt.
The sharp increase in military spending and support measures for businesses under sanctions has fueled inflation, forcing the Central Bank to raise rates to a record 21%. This has led to a surge in loan defaults and restructurings. VTB’s share of non-performing loans at the end of June stood at 4.1%, up one percentage point from last year. The cost of risk rose from 0.6% to 0.8%, and for individuals it nearly doubled. Retail loan defaults increased by 32% since the start of the year, with mortgage delinquencies particularly pronounced.
For the corporate loan portfolio, however, the real picture is clouded by restructurings and the lack of transparency on war-related lending.
Official Optimism and Hidden Threats
Despite the drop in interest income, VTB posted a net profit of 280 billion rubles in the first half of the year — mainly from trading financial instruments and commission income. However, these sources are considered volatile and unreliable in the long term, as evidenced by a 10% drop in profit in Q2 2025.
Central Bank Governor Elvira Nabiullina insists there is “no cause for concern,” citing reserves of 8 trillion rubles and the regulator’s readiness to ease capital requirements if necessary. However, Bloomberg reports that behind closed doors, there are already quiet discussions in the banking sector about the possible need for recapitalization.
By comparison, Russia’s largest bank, Sberbank, reported an 18.5% increase in net interest income, bringing it to 1.7 trillion rubles — a sign of far greater stability. Experts warn that the gap between official optimism and real figures in VTB’s case may indicate growing pressure that could lead to the need for large-scale state support for the banking system as a whole.
This article was prepared based on materials published by Bloomberg. The author does not claim authorship of the original text but presents their interpretation of the content for informational purposes.
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