Banks carried out work on losses
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The Central Bank of the Russian Federation disclosed the results of the banking sector in January-October. The total loss of credit institutions, which in the first half of the year amounted to 1.5 trillion rubles, decreased by more than three times, to 0.4 trillion rubles. According to experts, large-scale easing of the Central Bank, the depreciation of the ruble, as well as favorable conditions on the debt market helped banks. At the end of the year, market participants expect to break even. However, the Central Bank estimates the need for additional capitalization of individual banks at 0.7 trillion rubles.
Bank of Russia published review of financial stability for the third quarter, and also disclosed the results of credit institutions (COs) for ten months. It follows from them that according to the results of January-October, banks received a total loss of 0.4 trillion rubles. At the same time, according to the results of the second quarter, the loss exceeded 1.23 trillion rubles, and in the first quarter it amounted to 0.27 trillion rubles.
Thus, for the third quarter and October, banks were able to win back most of the loss received in the first half of the year.
At the same time, net interest income (1.1 trillion rubles) and net fee and commission income (0.43 trillion rubles) were record highs since the beginning of 2019. In addition, banks showed profit from operations with securities (against the recovery of the bond market) after unprofitable first two quarters. The reserves also decreased – from 0.6 trillion rubles. in the second quarter to 0.4 trillion rubles. following the results of the third.
In general, the regulator is confident in the stability of the banking system.
According to the results of the stress test, “in the banking sector on the horizon until the end of 2023, in the event of continued sanctions pressure on the Russian economy and a deterioration in the credit quality of borrowers, the banking sector as a whole will remain stable,” writes the Central Bank. “Only some banks, in case of stress, may need additional capitalization,” the regulator clarifies, estimating its volume at 0.7 trillion rubles.
The largest player in the sector, Sberbank, managed to reach net profit following the results of ten months, and they claim that they no longer use the benefits of the Central Bank. However, the second largest bank, VTB, is still unprofitable and does not expect a profit at the end of the year (see “Kommersant” dated November 11).
Experts are sure that the results of the banking sector would be many times worse if it were not for the large-scale easing of the Central Bank introduced after the start of hostilities in Ukraine and large-scale sanctions (see “Kommersant” dated November 25).
Analysts interviewed by Kommersant believe that in the absence of tough sanctions against large banks, the sector, taking into account the easing, could already make a profit.
The recovery of the financial result is due to the preservation of the ability of banks to generate net interest and commission income while reducing the impact of one-time negative factors – losses from currency revaluation and the simultaneous creation of a large amount of reserves, Valery Piven, head of the financial institutions rating group at ACRA, said. by the end of the year, at least to neutral,” he believes. “The probability of this is quite high: the net profit of banks in October alone amounted to about 400 billion rubles, while a number of market participants demonstrate an improvement in financial results.”
The trend towards the weakening of the ruble in the third quarter and October also helped to reduce the sector’s loss, said Lyudmila Kozhekina, director of banking ratings at Expert RA. “Growing net interest income also provided support, as during this period banks reduced the cost of funding, and corporate lending rates, which were raised at the beginning of the year, have not yet been revised down,” she adds.
A significant improvement in the financial result is due to an increase in the interest margin, including due to a decrease in the cost of funding in the third quarter and a recovery in lending activity after a decline in the spring, adds Mikhail Doronkin, managing director of the NKR rating agency.
The probability of the banking sector reaching a zero financial result for the year has increased, Alexander Danilov, Director of the Banking Regulation Department of the Central Bank, confirmed at a press conference on Thursday. Mikhail Doronkin believes that “in the fourth quarter, the sector will remain profitable and may even reach a small plus by the end of the year.”
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