In Russia, nearly 25% of credit institutions have become unprofitable

The number of unprofitable credit institutions—banks and microfinance companies—has risen sharply in Russia. As of the end of the second quarter of 2026, nearly a quarter (24.5%) of all market participants were operating at a loss. By comparison, a year ago the figure stood at 18%. This is according to data from the Central Bank, as reported by Izvestia. Meanwhile, the number of unprofitable institutions jumped 87% year-over-year from January to August, reaching 86. Specifically, as of August, 65 out of 300 banks were operating at a loss.

The Central Bank noted that, overall, the situation does not threaten the stability of the banking system. According to the regulator’s estimates, the sector’s aggregate profit by the end of 2026 could reach a record 3.9–4.4 trillion rubles. However, about 75% of all profits are accounted for by the 10 largest players, noted Vasily Kutyn, Director of Analytics at Ingo Bank. At the same time, temporary negative results in the second quarter were recorded not only by small players but also by some large ones—for example, PSB, added Natalya Milchakova, lead analyst at Freedom Global.

Small and regional banks are finding it most difficult to maintain profitability, as they face high funding costs and a deterioration in the quality of their loan portfolios. According to Kutyn, following the key rate cut, income from investing excess liquidity has declined, while previously attracted high-cost deposits continue to generate high interest expenses. In addition, the rise in delinquent loans is forcing banks to allocate more funds to reserves.

Local players are also experiencing difficulties in expanding their businesses, Milchakova notes. She explained that demand for loans in small cities is limited, and the quality of borrowers—especially among small and medium-sized businesses—is deteriorating more rapidly. Additional pressure is created by a liquidity shortage and restrictions on lending to customers with high debt burdens.

At the same time, small and regional banks continue to play an important role in the financial system. Valeria Popova, a senior analyst at the investment firm Ricom-Trust, noted that these banks provide financial infrastructure in small towns and work with local small and medium-sized businesses, occupying niches that are often less attractive to large players.

The growing number of unprofitable banks could accelerate consolidation in the sector, says Pavel Zholobov, junior managing director at the NRA rating agency. According to him, some owners of small credit institutions are already prepared to exit the business due to low returns. Milchakova noted that stricter capital requirements starting in 2028 could push some regional players to merge with larger banks.

source: The Moscow Times https://archive.is/LOGsu