Russian banks lost a total of 1.5 trillion rubles ($24.95 billion) in the first six months of 2022, a top official at Russia’s central bank told the RBC economic daily.
It is the first time the regulator has published banking sector earnings since February when Russia sent troops into Ukraine. Indeed, Russia protects all its financial reports as state secrets to avoid revealing the true extent of the economic damage caused by Western sanctions.
The losses are mainly due to foreign exchange operations
About two-thirds of the banks’ losses were related to operations in foreign currencies, said Dmitry Tulin, first deputy chairman of Russia’s central bank. We can only guess which operations were so loss-making, but there is a strong possibility that they were mainly those linked to the dollar and the euro.
Tulin said there was “more than a 50% chance” that losses for the full year would not exceed the 1.5 trillion rubles of the first half of the year.
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The losses were concentrated among the largest banks, Tulin said. Thus, banks recorded a total loss of 1.9 trillion rubles ($31.60 billion). In contrast, profitable lenders made a total of 400 billion rubles ($6.65 billion), giving us a net loss of just 1.5 trillion rubles.
The central bank does not expect a repeat of the 2014-17 banking crisis, when the regulator had to bail out several lenders and revoke banking licenses of hundreds of poorly capitalized banks.
The ruble remains strong
The ruble is the world’s best-performing currency so far this year. This is due to numerous measures, such as the need to pay for major Russian commodities in rubles, special capital controls by the central bank to prevent currency sell-offs, as well as a host of other measures. One of the next steps is likely to be large purchases of foreign currencies, especially the Chinese yuan.
However, we have seen the problem with the repayment of foreign debt, where Russia for the first time in 100 years has not been able to repay its debt and so bankruptcy has been declared.
The situation is likely to escalate, as there is now talk of further interference in trade between the Western world and Russia. The G7 leaders have agreed to cap the price of Russian oil, which has, of course, provoked a reaction, and Russia has announced that those who engage in this capping will not be the recipients of oil. There is also talk within the EU of capping Russian gas prices, which could mean a similar scenario to that of oil.