Putin's Defense Bank Reports Multi-billion Dollar Losses

Because of loan defaults.

PSB Bank, which is the backbone bank of Russia's military-industrial complex, ended 2025 with a loss. According to The Moscow Times.

The bank, which ranks among the top 5 in Russia in terms of assets and holds more than 1 trillion rubles in individual deposits, was plagued by loan defaults. Over the year, PSB spent almost 300 billion rubles on provisions for potential credit losses - three times more than a year earlier.

Although PSB received 29.6 billion rubles in state aid last year, it became the first bank and top bank to post an annual loss. In October-December, the Rosneft-affiliated Moscow Credit Bank also showed a quarterly loss, as its loan delinquency jumped 600%.

In the banking system as a whole, according to the Central Bank of Russia, the volume of bad loans reached 10.4 trillion rubles: in January-September, debts on which companies and individual entrepreneurs were unable to repay on time grew by 1.9 trillion rubles. In fact, a latent banking crisis has begun in the country, experts from the Kremlin-linked think tank CMACP warned in February.

Bankers, including state-owned bankers, began sounding the alarm in a non-public format last summer when loan delinquencies began to increase among large companies. The wave of defaults affected defense plants, among others, which could have received more than 20 trillion rubles in loans for military production.

"This is a huge pool of poorly regulated shadow debt that sits at the heart of the banking system," noted Craig Kennedy, a former vice president at Bank of America and now an expert at Harvard's Center for Russian and Eurasian Studies. In Kennedy's view, this is essentially a second, secret military budget that was spent on the war on top of the 42 trillion rubles (or $542 billion) officially allocated by the treasury.

Financial and economic officials warned Vladimir Putin late last year that the banking system was under pressure from high interest rates and large amounts of loans to finance the war, a source close to the Cabinet told The Washington Post. Putin was warned that an economic crisis could hit the country as soon as the next few months, the WaPo source said.

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