Russian banks made record $37 billion in profits in 2023 -c.bank

MOSCOW: Russian banks made record profits of 3.3 trillion roubles ($36.96 billion) last year, the central bank said on Tuesday, driven by sharp rises in mortgage, consumer and corporate lending as the sector rebounded from a sanctions-induced slump in 2022. Profits fell by almost 90% in 2022 as the West imposed sweeping sanctions on Russia's financial sector over Moscow's actions in Ukraine. High net interest margins, particularly thanks to the state's burgeoning defence budget, have also aided the recovery.

Alexander Danilov, director of the central bank's banking regulation and analytics department, said banks' profits this year were seen dropping to 2.3-2.8 trillion roubles. The bank has previously said high interest rates would cool lending growth.

The bank hiked rates to 16% at its last meeting in December and double-digit rates are expected to remain in place all year, although Central Bank Governor Elvira Nabiullina issued a dovish signal on Tuesday as she returned to work following a short, unexplained absence. Banks' mortgage lending portfolio grew by a record 34.5% in 2023, the central bank said in a report, while corporate and consumer lending increased by 20.1% and 15.7% respectively.

Mortgage lending last year showed signs of overheating in the sector, Danilov said, expecting growth to slow to 7-12% in 2024. Consumer and corporate lending growth is also seen easing. Since sending its army into Ukraine in February 2022, Moscow has seen an exodus of foreign capital and relied more heavily on domestic lenders to fund government and private spending.

The central bank said Russian banks had reduced their foreign currency lending by $3.1 billion in 2023, compared with a $30.2-billion decrease in 2022. Russian banks, meanwhile, snapped up around 60% of the 2.5 trillion roubles of OFZ treasury bonds issued by the finance ministry in 2023, the bank said.