By Alexander Marrow
VLADIVOSTOK, Russia (Reuters) – The head of Russia’s VTB, Andrei Kostin, said on Wednesday the nation’s banking sector had largely overcome the most serious effects of Western sanctions and that systemic capitalisation of Russian banks was likely not needed.
Hit by unprecedented economic sanctions from the West, Russia’s banking sector posted heavy losses in the first six months of the year and officials have pushed lenders to drastically reduce their exposure to the U.S. dollar and euro.
“It is maybe too early to say, the central bank is now analysing the information, but maybe some kind of systemic recapitalisation of the banking sector is not needed,” Kostin said at a session on the transformation of Russia’s financial sector at the Eastern Economic Forum in Vladivostok.
VTB, Russia’s second-largest lender returned to profit in July after record losses in the first six months of the year, and will start lending in the Chinese yuan and other non-Western currencies later this year, it said on Tuesday.
Kostin added later that there was room for Russia’s central bank to cut its key rate to 7.5% and then 7% from 8% now to stimulate lending in Russia’s banking sector.
The Bank of Russia next meets on rates on Sept. 16.
Western sanctions on Russia over its actions in Ukraine have cut Moscow off from the global financial system and from nearly half of its $640 billion in gold and foreign exchange reserves.
CEO Kostin had said in April Russian banks would likely need a wider recapitalisation to cope with losses.
Russian officials have heralded the economy’s performance in recent months, saying it is holding up much better than expected in the face of sanctions.
Russia Economy Minister Maxim Reshetnikov on Tuesday said the economic contraction this year would be 2.9%, shallower than previously forecast.
Kostin on Wednesday said VTB expects a 4% GDP contraction, followed by a 1.5% drop in 2023.
Kostin and other panelists, including Igor Shuvalov, chairman of Russia’s state development bank VEB, discussed Russia’s de-dollarisation drive and the need to further develop settlements and interactions with other currencies, such as the yuan and Turkish lira.
(Reporting by Alexander Marrow and Vladimir Soldatkin; Editing by Tom Hogue and Muralikumar Anantharaman)
