The bank makes money from corporate clients

The main source of profit for Dom.RF Bank in 2023 remained lending to developers, and the financial result from the treasury business increased. However, profits from the retail business fell despite record mortgage originations. Experts note that funds attracted to escrow accounts and deposits of individuals and companies give the bank the opportunity to significantly earn money on project financing.

According to financial statements according to international standards (IFRS) of Dom.RF Bank, published on February 26, its net profit increased in 2023 by 18.4%, to 29 billion rubles.

At the same time, the volume of net profit from the retail business decreased by 16.2%, to RUB 367 million. This happened despite the growth of the mortgage portfolio (up to 490 billion rubles), as well as a slight reduction in expenses for reserves for it (unlike the construction financing portfolio, where expenses for reserves doubled to 7.3 billion rubles).

The financial result of Dom.RF’s corporate business is significantly higher and provides the bulk of the profit.

However, it also showed negative dynamics: for the year, net profit decreased by 1.6%, to 20.2 billion rubles. But the result of the treasury business (liquidity management) increased almost 1.7 times, to 4.6 billion rubles.

The bank explained the decrease in profitability from the retail business by increased costs, in particular on advertising. The segment’s customer base increased by 25% over the year, and its resource portfolio almost doubled.

The growth in the financial result of the Treasury “is due to the successful management of the bank’s interest position and profit on transactions with currency and derivative financial instruments,” the bank clarified. Dom.RF has inter-segment operations (intra-group operations between group segments excluded as part of consolidation), which develop differently for different lines of business. In particular, for corporate business they brought 9.6 billion rubles. income, and for retail – 14.2 billion rubles. expenses. As the bank explained, “in 2023, the corporate business line significantly increased the volume of the liability base, which made it possible to obtain additional transfer financial results.”

According to the managing director of the NKR rating agency, Mikhail Doronkin, in the retail business the bank is actually represented by a single product, mortgage, which has the least margin. The majority of mortgages, as a rule, are concessional loans, where rates are significantly lower than market rates. The largest volume of loans issued in 2023 was for “family mortgages” – 35%, another 31.5% was provided by preferential mortgages for new buildings, 16% – IT mortgages. Only 13% were mortgages under market programs.

Moreover, in 2023 the government reduced the amount of subsidies under preferential programs increased by 1 percentage point in total, which began to put additional pressure on business margins. In IFRS financial statements, subsidies are recognized as interest income is recognised.

As financial expert Andrey Barkhota notes, a retail business requires a stable infrastructure base, consisting of a network, human resources and IT. In segment reporting, he explains, it is noticeable that administrative and economic expenses of retail business are lower than corporate ones by no more than 15%, although assets are four times less. The bank does not have a “developed retail transaction circuit,” and therefore the segment’s commission margin is much lower than in other, more universal large Russian banks, the expert believes.

In corporate business, Mr. Barhota clarifies, the situation looks better: “The economics of project financing is based on escrow accounts. Due to the implementation of the interest spread factor, which is fundamentally higher in the corporate segment due to the economy of escrow accounts (the bank does not pay interest on them.— “Kommersant”), the bank manages to get a higher margin than from issuing mortgages.”

Olga Sherunkova