ACRA forecast for the banking market for 2024

At the end of 2023, banks will receive a record profit of more than 3.3 trillion rubles. It was ensured by the accelerated growth of lending, the opportunity to make money on currency revaluation and benefits from the Central Bank. But 2024, analysts believe, will be more difficult: lending will slow down in all segments, and an increase in problem loans is likely in the corporate segment. Banks will have to forget about income from currency revaluation; as a result, sector profits will drop to 3 trillion rubles. or even less.

Analysts from the ACRA rating agency prepared a forecast for the banking market for 2024, which Kommersant reviewed. The net profit of the sector at the end of 2023 will exceed 3.3 trillion rubles, which will be a record figure. “The strengthening of banks’ ability to generate profits is primarily due to the growth of net interest income, which was influenced by both the rapid increase in the loan portfolio and the increase in net interest margin (NIM in January-September increased from 4% to 4.6%),” – says the forecast.

In the past year, banks were able to increase their portfolio in all key segments with its total growth exceeding 25%. Thus, in the corporate segment, portfolio growth amounted to 25.8% (versus 16.6% a year earlier), in the retail segment – 25% (9.5% in 2022). However, the conditions for the development of the industry are deteriorating.

“An increase in the key rate from 7.5% to 16% this year will most likely lead to a significant decrease in the growth rate of the loan portfolio, as a result of which its increase in 2024 may not exceed 15%,” the agency believes.

According to ACRA forecasts, growth rates in the corporate portfolio in 2024 will be higher than in the retail portfolio—10–15% versus 5–10%. However, the level of overdue debt in the corporate portfolio, according to agency forecasts, will increase from 3.3% at the end of this year to 4.3%, while in retail it will remain almost at the same level: 3.8% versus 3.7% in 2023 year. “In the corporate segment, a fairly large share of loans was provided at a floating rate, and in 2023 there was a significant increase in the debt burden,” analysts explain.

Bankers generally share the same expectations. “By the end of 2024, we expect a slowdown in the growth of mortgages in the banking system to 10–12%, unsecured consumer loans to 2–4%, corporate loans to 9–11%,” says PSB Banking and Financial Markets Analysis Manager Dmitry Gritskevich. “Next year will be difficult for lending. Due to the tightening of monetary policy, the retail lending market will cool by an average of 25–30%,” says Alexey Okhorzin, deputy chairman of the board of Pochta Bank. According to the director of the group of financial institution ratings of the NKR agency, Yegor Lopatin, retail will be affected both by an increase in the cost of loans due to an increase in the key rate, and by the regulator’s measures to cool the segment.

Currency revaluation will also be a source of lost revenue for the banking sector in 2024, notes Dmitry Gritskevich:

“We expect the ruble exchange rate to remain near the level of 90 rubles/$. In January-September 2023, the income received by banks from foreign currency transactions amounted to about 1.12 trillion rubles, or 17% of operating income before reserves.”

According to ACRA estimates, in 2023, systemically important credit institutions generated 7–50% of operating income through foreign exchange transactions; the main factor that ensured this result was the depreciation of the ruble against the US dollar. A decrease in volatility in the foreign exchange market will lead to the fact that by the end of 2024, the result from transactions with foreign currency may also be close to zero, analysts believe.

As a result, ACRA expects a decline in banking sector profits to RUB 2.9–3 trillion. in 2024. NKR has an even more pessimistic forecast: Taking into account the dynamics of lending and in the absence of a significant amount of one-time effects (for example, a positive revaluation of the currency due to the devaluation of the ruble), we can expect a sector profit of more than 2.5 trillion rubles. But bankers are optimistic: Mr. Gritskevich believes that the profit of the banking sector in 2024 will be at the level of 2023 or slightly lower.

Ksenia Dementieva