Russia is facing mounting fears of a full-blown banking crisis after its key war lender suffered heavy losses, fuelling warnings that industries may soon demand sweeping state bailouts. Promsvyazbank (PSB), the biggest lender to defence firms backing Vladimir Putin’s war effort, has recorded a 19.2 billion ruble (£190million) loss last year after the bank was forced to set aside a staggering 300 billion rubles to cover souring loans.

The sharp reversal marks a dramatic shift for a lender, which had previously thrived by bankrolling the Kremlin’s military-industrial expansion. Analysts have now warned that the losses may be an early sign of deeper cracks spreading across Russia’s finances. Since the invasion of Ukraine, the Kremlin has pumped vast sums through state-backed banks into companies, particularly in the defence sector, helping sustain growth and creating what some economists describe as an illusion of resilience. However, that borrowing boom is now turning into a weakness.

“We are already formally under the criteria of a banking crisis. The only thing that is missing is a bank run,” said Vladimir Milov, an exiled opposition politician who was formerly a deputy energy minister under Putin, according to The Telegraph.

According to Russian central bank data, banking sector profits fell by 55% to 176 billion rubles (£1.7billion) in December, with Moscow Credit Bank, another major lender tied to the state oil giant Rosneft, also reporting a loss in the final quarter of 2025 as it grappled with a surge in loan defaults.

At the start of February, the Centre for Macroeconomic Analysis and Short-term Forecasting (CMASF), a think tank aligned with the Kremlin, published a report stating that a “banking crisis has now been confirmed,” which, based on its own definition, means that more than a tenth of banks’ loan books are unlikely to be repaid.

To cover its war costs over the course of the now over four-year war in Ukraine, the Kremlin has been injecting massive amounts of cash into Russian companies through its banks. This, according to Craig Kennedy, from the Harvard Davis Center for Russian and Eurasian studies, has fuelled economic growth and created an illusion of Russian resilience.

“This has created a large pool of opaque, unmeasured and poorly managed default risk at the heart of the Russian banking system,” the former vice chairman at Bank of America Merrill Lynch warned in his Substack, Navigating Russia.

Loans to defence companies alone have surged to more than $200billion (£2billion), accounting for nearly a quarter of all corporate lending – despite the sector’s historically weak credit record. According to Mr Milov, PSB’s losses reflect “deep troubles in the Russian military industrial sector”.

The fallout is already spreading beyond the military sector. Three-quarters of Russian industries are now either struggling or stagnating, with key sectors such as coal, steel, paper and construction facing acute pressure. Consumer lending has also swung from strong growth to contraction, with central bank data showing this shrank by -0.7% in 2025 – a stark shift from the 11.3% growth recorded in the previous year.

Putin himself revealed that Russian GDP had contracted by 1.8% in January and February compared to the same period last year. In March, the Russian leader then told his country’s oil and gas companies that they should use windfall oil profits triggered by the war in Iran “to reduce their debt burden and pay off their debt to domestic banks”.

For now, Russia’s economy is surviving on the fact that soaring oil and gas prices are bringing in higher revenues for Russia’s energy giants since the war broke out in the Middle East. This, some economists have predicted, will help the Kremlin avoid a recession in the second half of this year.

However, if Donald Trump manages to secure a peace deal with Iran and the global energy crisis subsides, a resultant drop in energy prices could rapidly expose the scale of the problem, forcing the Kremlin to step in with costly bailouts for banks and state-backed companies. Estimates suggest such a rescue could run to 10% to 20% of GDP in a worst-case scenario.

Investigators hunting for the abducted son of a wealthy Ukrainian businessman discovered gruesome remains in a popular British holiday destination. A decapitated head, along with several other body parts recovered by authorities, has been confirmed as belonging to Igor Komarov, who was abducted on 15 February. Evidence suggests that Igor’s murderers had been tracking him for several weeks, successfully locating him through geolocation data from Instagram posts shared by his influencer girlfriend, Yeva Mishalova.

Prior to his death, a disturbing video was posted by Igor’s captors, demanding approximately £7 million in ransom for his safe release. In the footage, the visibly wounded 28-year-old Ukrainian pleaded for his survival, stating: “They already chopped off some of my limbs, I have broken legs [and they] punched [my] ribcage. I’m already on meds, I already have no limbs.”

In the recording, Igor cautioned that without immediate medical attention his injuries would become septic, and emphasised that his abductors could not be located before their ultimatum expired. He went on: “Bring me home, what is left of me at the moment, please settle with these people, they need ten million dollars, which we stole”, reports the Daily Star.

“As soon as these ten million are received in their accounts, they will immediately let me go to the place where they took me.” Igor had been riding motorbikes with a group of friends on a steep road in the northern part of the holiday island when armed assailants suddenly attacked them. Some accounts claim that one of Igor’s companions was also taken by the attackers and subsequently freed after a ransom payment, but Igor appeared to be the kidnappers’ primary target.

A fresh examination of the fatal abduction on true-crime channel Lazy Masquerade suggests that the attackers were able to locate Igor through Yeva’s persistent social media activity.

In addition, photos shared by Yeva, 25, offered comprehensive insight into Igor’s whereabouts. They stated: “She updated her fans on her daily activities with Igor, posting photos and videos in real time with captions and geotags. That meant that anyone keeping an eye on the couple knew exactly where they were.”

A romantic Valentine’s Day post on 14 February, depicting the couple in swimwear enjoying the tropical island, was the particular clue that reportedly led Igor’s kidnappers to him.

Following the disturbing ransom video shared via Telegram, a second clip surfaced in which Igor, visibly under pressure, alleged that his father had been operating a fraudulent call centre in Ukraine and had swindled victims out of millions. Less than two weeks after Igor’s abduction, human remains were discovered at the mouth of the Wos River along Bali’s lower east coast. A police statement revealed that the head, right leg, upper chest, thighs, and internal organs had been severed from the body of an individual who had died two to three days prior.

The testing confirmed that the DNA of the recovered body parts was a close match to tissue samples provided by the victim’s parents.

Forensic examination also connected the victim’s mutilated remains to bloodstains and other evidence discovered in a rental car and a vacation villa in Bali’s Tabanan region, believed to have been rented by the perpetrators.

Bali Police Senior Commander Ariasandy told the Jakarta Globe: “Blood spatters found at the villa and in the Avanza car, which is suspected to have been used by the perpetrators, were examined, and the results are identical to the DNA of the victim’s mother.”

Due to the advanced state of decomposition of the remains, visual identification proved impossible, prompting investigators to send six bone samples to the National Police Forensic Laboratory Centre in Jakarta for DNA analysis.

The testing confirmed that the DNA of the recovered body parts was a close match to tissue samples provided by the victim’s parents.

Forensic examination also connected the victim’s mutilated remains to bloodstains and other evidence discovered in a rental car and a holiday villa in Bali’s Tabanan region, believed to have been rented by the perpetrators.

Bali Police Senior Commander Ariasandy told the Jakarta Globe: “Blood spatters found at the villa and in the Avanza car, which is suspected to have been used by the perpetrators, were examined, and the results are identical to the DNA of the victim’s mother.”

He further noted that CCTV footage capturing a Toyota Avanza and two motorcycles travelling from the original crime scene had directed investigators to the property, and that a man who had used a forged passport to rent the vehicle was already in custody.

“Initially, we secured one foreign national with the initials CH, who rented vehicles using a false passport,” he said. The suspect informed police he was unaware the vehicle would be used in a criminal act and claimed he had been asked by others to rent the car in return for Rp 6 million (approximately £250).

“Following further investigation,” Ariasandy continued, “we named six other foreign nationals as suspects – RM, BK, AS, VN, SM and DH. All are men.”

Yeva has maintained a relatively steady presence on her Instagram account during this traumatic period, promoting mineral water and several other brands. She has offered no statement regarding Igor’s death apart from sharing a photograph of them on her story, with the caption: “I know for sure you’ll see this. My life. I love you.”