We shouldn’t expect a repeat of last year’s results in the banking sector

According to updated data from the Central Bank, the largest Russian banks at the end of 2023 significantly increased their profits. This was largely the result of a revival in investment demand and record lending growth. Some banks with foreign capital also continued to improve their results amid the revival of commission business. However, it will no longer be possible to maintain the momentum this year, experts say.

The largest Russian banks at the end of 2023 significantly increased their net profit (excluding events after the reporting date), follows from the annual reports published on February 1 Central Bank website. The growth leader was Gazprombank, whose profit increased 19.6 times, to 178.4 billion rubles. Sovcombank’s profit increased 6.9 times, to 97.9 billion rubles, and that of Sberbank – 5 times, to 1.5 trillion rubles. (see “Kommersant” dated January 18), for MKB – 4.9 times, to 42.9 billion rubles.

A number of systemically important banks (FC Otkritie, Tinkoff Bank, Rosbank, Rosselkhozbank) increased their profits by 2.7–4.3 times. Two credit institutions, VTB and Alfa Bank, which received the largest losses in 2022 (756.8 billion and 117 billion rubles, respectively), at the end of 2023 showed a profit of 241.5 billion and 117.8 billion rubles. respectively.

Among the systemically important credit institutions that disclosed the financial indicators, only banks with foreign participation showed modest profit dynamics.

Thus, Unicredit Bank’s net profit increased by only 3.2%, to 58.3 billion rubles, while Raiffeisenbank’s net profit decreased altogether – by 11.2%, to 125.3 billion rubles. Nevertheless, the latter remains in fourth place among Russian banks in terms of financial results for last year.

The leader in terms of losses was VUZ-Bank, which is undergoing reorganization (21.9 billion rubles), followed by its sanatorium UBRD (15.2 billion rubles). At the same time, the top ten most unprofitable included two large banks – Zenit (1.3 billion rubles) and Renaissance Credit (2.3 billion rubles). Zenit explained that the losses were due to the “creation of reserves for blocked assets.” Without taking them into account, “the bank is profitable, which is ensured through the operational management of business processes, the regional network, and the cost part.” Renaissance Credit reported that it had completed “a cycle of investments, the launch of new retail business areas, digitalization,” which should improve its financial results this year.

Banks with foreign capital demonstrated multidirectional dynamics. Chinese subsidiaries Bank of China and ICBC Bank, which in 2022 showed an increase in profits of 10.8–16.8 times, at the end of 2023 slowed down to 1.5–1.6 times (to 16 billion and 21 billion rubles, respectively). At Intes, profits more than tripled, to 6.3 billion rubles. OTP Bank showed multiple growth, receiving 21.7 billion rubles. against 133 million rubles. arrived in 2022. The bank points to the updated strategy implemented last year, which allowed it to achieve “significant profit growth in retail lending and transaction business.” At the same time, Goldman Sachs Bank, UBS Bank, and Natixis Bank were on the list of unprofitable banks.

Managing Director of Expert RA Yuri Belikov names strong lending growth among the key reasons for the dynamics of profits of large banks.

“This primarily affected the mortgage and consumer lending segments, where growth was observed from 2020 until 2023.” Corporate lending has also grown significantly. All this made it possible to cover associated costs, including expenses for reserves, the expert explains.

However, earnings expectations for 2024 are more conservative. According to Yuri Belikov, for the banking sector it will amount to 1.7–1.9 trillion rubles, which is lower than the Central Bank’s forecast (2.3–2.8 trillion rubles; see “Kommersant” dated January 31). The expert explains his forecast by the slowdown in mortgages and consumer lending, as well as regulatory measures by the Central Bank. In addition, Mr. Belikov notes, banks with foreign capital may reduce income from commission business, “the main outflow of capital has already occurred.”

Olga Sherunkova