Russia's second largest bank VTB said Tuesday it made a loss of 18.3 billion rubles ($371.8 million) in the first quarter, blaming a hike in interest rates and the economic slowdown.

The majority state-owned bank which has been targeted by European Union and United States sanctions had seen its profits almost halved in 2014.

Andrei Kostin, the bank's president, said results reflect the "significant challenges" that the Russian economy has faced.

"The sharp rise in interest rates had a detrimental effect on our margins, and the general economic slowdown led us to continue building significant provisions against our credit exposures."

In December, Russia's central bank hiked the interest rate by a massive 6.5 percentage points to 17 percent. It has since cut the rate twice to 12.5 percent.

In the fourth quarter of 2014, the bank lost 4.6 billion rubles.

The bank received 100 billion rubles in December from Russia's national welfare fund as part of a plan to recapitalise the banking system hit by the falling ruble and Western sanctions.

The national welfare fund is a mammoth pile of money accumulated over the years of high oil prices, when Russia made billions of dollars through its energy exports.