VTB Bank Faces Rising Retail Loan Delinquencies Amid Economic Challenges

VTB, a state-owned bank in Russia, has disclosed an increase in the proportion of delinquent retail loans, as reported by the bank’s Chief Financial Officer to the media on Tuesday.

In May, the share of non-performing loans (NPLs) that have been overdue for more than 90 days rose to 4%, up from 3.9% in April and 3.5% at the close of 2024.

CFO Dmitry Pyanov indicated that a significant portion of these non-performing loans comes from individual borrowers.

For corporate lending, overdue loans rose slightly to 3.5% in May, compared to 3.4% at the end of 2024. This increase encompasses a notable NPL component related to the coal sector, which has struggled significantly in recent months.

In contrast, the NPL ratio for individual clients experienced a steeper rise, climbing to 5% from 3.8% at the end of the previous year.

Pyanov attributed this uptick in the NPL ratio for individuals to factors such as the lack of a dilution effect, the portfolio’s runoff, and the underperformance of loans given during periods of high interest rates, referencing the Central Bank’s key interest rate of 20%.

«Regrettably, this trend seems likely to continue,» he added.

VTB stated that it would persist in decreasing its retail loan portfolio, and as it contracts, the proportion of overdue loans is projected to keep increasing.

Pyanov remarked that «a 5% level of bad loans is nearing the 7% seen back in 2009. Historically, the bank’s NPL ratio for individual borrowers peaked between 2014 and 2016, coinciding with challenges related to foreign currency mortgages.»

«Nevertheless, we have not yet reached the 8 to 10% levels observed during those years,» he explained.

If current trends maintain, Pyanov warned that the share of non-performing loans in the retail sector «could easily escalate to between 6 and 7% by 2026.»

He acknowledged that the bank had misjudged credit risks associated with loans issued in 2023 and 2024.

«We anticipated a lifetime cost of risk at around 3.5 to 4.5% for retail loans,» he noted, adding that this figure is now expected to rise to approximately 6%.

In contrast, the corporate lending market remains relatively stable, with no substantial increase in overdue loans among business clients and a low percentage of restructured loans.

Pyanov stated that «3% of the corporate portfolio is under restructuring, compared to peak levels of 11.8% in 2009 and 11% at the end of 2022.»

As of now, «NPLs are stable, although sectors such as coal and construction are experiencing more pressure,» he noted.

«The banking sector may be nearing a pivotal moment concerning key interest rates, which could alleviate financial strain on these industries in the future,» he remarked.

Sberbank’s CEO German Gref also observed a decline in portfolio quality, with an increasing number of companies requesting loan restructuring.

Deputy Central Bank Governor Alexei Zabotkin noted that the Bank’s board may consider a larger interest rate reduction at its July meeting than the one-point cut it made in June, lowering the rate to 20%.

Despite the rising risks associated with retail loans, VTB continues to grow its corporate loan portfolio. By the end of May, its total loan portfolio before provisions reached 23.8 trillion rubles ($300 billion), reflecting a 0.4% growth both in May and since the beginning of the year.

Loans to businesses amounted to 16.3 trillion rubles ($200 billion), with a 0.8% increase in May and a 2.3% rise over the first five months of the year.

In contrast, retail lending saw a decrease of 0.5% in May and a 3.6% decline over the first five months of 2025, with the retail loan portfolio totaling 7.5 trillion rubles ($95 billion) by May 31.

The retail loan share in the bank’s overall credit portfolio fell to 32% from 33% at the end of 2024.

Deposits and other funds held by individuals grew by 0.8% in May and by 4% since the beginning of 2025, reaching 13.5 trillion rubles. Conversely, funds from legal entities decreased by 4% in May and by 8.9% since the start of the year, totaling 12.7 trillion rubles ($160 billion).

Previously, VTB announced plans for 2025 to concentrate on more profitable corporate lending while scaling back unsecured consumer loans.