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The crisis facing banks was sharply underlined today when Russia's second-biggest bank admitted in Davos that it was seeking a bailout and Germany indicated that it was coming round to the idea of "bad banks" to hive off toxic debt.Russian banks have been badly hit by the global economic crisis, which has hammered the country’s stock, bond and currency markets. A number of its smaller banks have already failed, and some of its biggest lenders may need capital injections.Speaking at the World Economic Forum in Switzerland, Andrei Kostin, the chief executive of VTB, Russia's second-largest bank, said that the lender may issue preference shares this year as part of a 200 billion rouble(£4 billion, $5.7 billion)state recapitalisation. “There is no final decision yet on the size of the capitalisation,” Mr Kostin said. “We think that 200 billion roubles would be the right decision."The capitalisation is linked to an additional share issue which takes about half a year in Russia, so we think the decision should be taken now. There are different options, including the issue of preference shares.”Mr Kostin said he hoped VTB could break-even for 2008 under international accounting, but that it was too early to forecast 2009 results. He said non-performing loans totalled about 3.8 per cent but VTB was using forecasts for bad loans for 10 per cent, for planning purposes.“The worst scenario is up to 10 per cent,” he said.“The reason for the crisis in the Russian banking sector is quite different to in the West. In Russia, a major problem is the inability of companies to return debts.”VTB has to pay about $7 billion in foreign debt this year and will seek to refinance some of it, he said.“We will negotiate for refinancing but we think we will have enough liquidity for this year,” said Mr Kostin.“Frankly speaking, this year it will be very difficult for Russian companies to find funding abroad, with the exception of major companies who have a state guarantee, or some of the oil companies.”By Jenny Booth
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