Profit “closed line” – Newspaper Kommersant No. 62 (7507) dated 04/11/2023

Subsidiary foreign banks in Russia report on new successes following the results of the crisis year 2022. Thus, Credit Europe Bank managed to increase its net profit by almost eight times. However, the sources of such a sharp increase are not obvious: it occurred against the backdrop of a reduction in net interest, as well as commission income. Probably, the bank reflected a significant inflow of income on “closed lines” in the truncated financial statements.

Credit Europe Bank (52nd in terms of assets) increased its profit by the end of 2022 by almost eight times, to 6.06 billion rubles, follows from the published report under RAS. Net loan debt increased from 114.6 billion to 144.15 billion rubles. The bank also increased client funds from 98.3 billion to 125.2 billion rubles. The total net income of the bank almost doubled to 14.6 billion rubles. However, there are no visible sources of growth. Net interest and commission income decreased from RUB 8.36 billion to RUB 7.7 billion. and from 6.3 billion to 4.1 billion rubles. respectively. Credit Europe Bank did not respond to Kommersant’s request.

Among other retail banks, this is the most dynamic and positive result so far. Post-Bank received a loss (3.1 billion against 1.3 billion rubles in profit a year earlier). MTS-Bank reduced its profit by 1.9 times, to 2.56 billion rubles, at HCF-Bank it decreased by 5 times, to 1.56 billion rubles. (see “Kommersant” dated April 5), at OTP-Bank – by 21.3 times, up to 133 million rubles, the financial result for the reporting period turned out to be negative – 178.6 million rubles. Renaissance Credit and Russian Standard did not publish financial statements. Post-Bank explained that “a one-time loss in the first half of last year was associated with significant interest expenses of the bank against the backdrop of an unstable situation and volatility of rates.” However, already in the second half of the year, the bank reached a positive result and earned a profit of 3 billion rubles, they noted there.

The total interest income of Credit Europe Bank grew, but net interest income showed a decrease, including against the background of a significant additional creation of reserves, said Roman Kenigsberg, Head of the FBK Internal Audit and Risk Management Department. At the same time, the report does not disclose the results from derivatives, foreign exchange transactions and income from participation in other organizations. Perhaps it was in these operations that any significant income could be reflected, the expert believes.

The reasons for the growth in income of Credit Europe Bank in its report under RAS are really not obvious, banking expert Alexei Nechaev confirms. We can talk about an increase in the financial result for lines that are not disclosed in the new version of the financial statements: income from currency transactions and from participation in the capital of other legal entities. However, income from participation could hardly give a significant increase in the bank’s profit, Mr. Nechaev clarifies. Most likely, the expert believes, the bank made good money on conversion operations, which is associated with an increase in demand for cross-border payments in 2022.

Against the backdrop of a significant increase in the loan portfolio, the bank’s net interest margin decreased, “the bank earned more on loans than in the previous year, but the resources also became more expensive,” says Mr. Kenigsberg. At the same time, it is difficult to say whether the achieved level of profit can be considered one-off, he concludes. At the same time, according to the results of 2022, there was no significant drop in net interest income (the decrease was 8%), says Lyudmila Kozhekina, Director for Banking Ratings at Expert RA.

Unlike other retail banks, Credit Europe Bank managed to increase its loan portfolio in 2022 (by 26%), which had a positive impact on business margins due to a period of high key rates. Also, Ms. Kozhekina says, a noticeable positive impact on the amount of profit was made by a decrease in commission expenses (minus 2.6 billion rubles), which she attributes to the fact that the bank stopped paying commissions to foreign payment systems Visa and MasterCard that left Russia.

Olga Sherunkova