Banks are increasing their income – Newspaper Kommersant No. 211 (7412) dated 11/15/2022

The Russian OTP-Bank significantly increased its profit in the third quarter. The most dynamic indicator of the income statement is other non-interest income, which was provided mainly by currency conversion. It is becoming a significant source of income for other banks as well. Also, credit institutions increase profits by reducing the cost of funding. However, in the fourth quarter, experts believe, the situation may worsen.

According to the Hungarian OTP Group, the net profit of the Russian OTP Bank in the third quarter increased three times, to 38.5 billion forints (5 billion rubles), and in the first nine months it decreased by 2%, to 23.7 billion forints ( 3 billion rubles). The third quarter saw an increase in both interest and commission income (by 40% and 55%, respectively). At the same time, “other non-interest income” showed the largest increase – by 670% compared to the previous quarter, to HUF 10.7 billion. This was mainly due to the growth of income from conversion operations.

As independent expert Andrei Barkhota explains, the nominal growth of interest and commission income of OTP Group for January-August amounted to 16% and 14%, respectively. Part of this growth is offset by inflation in Eastern Europe. At the same time, the growth of other non-interest income reached 51% in annual terms, which is mainly due to a significant increase in conversion income. In the third quarter alone, they reached 53 billion forints, of which about 20% is accounted for by the Russian OTP-bank.

Now only a few Russian banks regularly publish financial indicators. Last week, for the first time in a long time, excerpts from the financial statements were disclosed by Sberbank, which in January-October showed an increase in net interest and commission income, by 2.7% and 3.9% yoy, respectively. The Russian division of Raiffeisen Bank International also actively increased fee and commission income in the third quarter, which outpaced interest income by 50%, to €629 million, and by 21%, to €476 million, respectively.

Recently, bank customers have regularly complained about low conversion rates. At the end of October, the head of the Central Bank, Elvira Nabiullina, admitted that “spreads for the sale and purchase of cash currency have increased, this reflects the fact that we are faced with serious restrictions on the flow of cash currency into our country.” However, according to her, the regulator will not interfere in the policy of banks to set spreads.

The financial result of OTP-bank was also affected by the fact that there was a significant release of reserves. Operating expenses increased by 20% in the third quarter and by 73% yoy in forints, but decreased by 1% in ruble terms. This came amid a strengthening of the online sales channel and a reduction in the number of branches from the beginning of the year by 20%, to 107 branches, as well as a reduction in staff – also by 20%, the group said in the comments. Reduced the network of branches and Sberbank, only in September it decreased by more than 500 offices, to 12.4 thousand offices (see “Kommersant” on October 13). This helped the largest bank save at least 20 billion rubles. In terms of sales, bank branches sometimes lose out to a mobile application and more often act as an expense component than a margin generator.

Despite the good results of banks, experts are cautious about the prospects for growth in their income until the end of the year. As Yury Belikov, Managing Director for Validation of Expert RA, noted earlier (see Kommersant dated November 11), even if most of the losses on credit and market risks are reflected, now the market “has developed factors that constrain lending.” The cost of funding may also increase. Thus, according to the Central Bank, the maximum interest rate on deposits of the largest banks by the end of October reached 6.84% per annum, returning to the values ​​of the end of August. In addition, even a short-term stagnation in lending can significantly hit the net interest margin of the sector, since in the conditions of the volatility of liabilities, banks somehow maintain a liquidity cushion – non-performing assets.

Olga Sherunkova