Bank of Russia raised its forecast for the profits of Russian banks in 2023, expecting results that may break the 2021 record. This year’s high numbers are coming after 2022 became the worst annual period in seven years for the sanctioned Russian banking sector in terms of financial outcome.
Banks in Russian Federation Headed for at Least $23 Billion in Profits in 2023
Data from the first months of 2023 give the Central Bank of Russia (CBR) reason to believe that by the end of the year Russian banks can earn 1.9 trillion rubles (almost $24 billion), “or even more, which is comparable to the profit for 2021,” Deputy Governor Olga Polyakova unveiled at a conference held by the National Credit Ratings (NCR) agency.
Two years ago, Russian banking institutions made a record-high 2.37 trillion rubles (close to $30 billion at current exchange rates), the business daily Vedomosti noted in a report, quoting the central bank official and the organizers of the forum.
When it released its baseline projections in March, Bank of Russia expected net profits in the banking sector to reach 1.2 – 1.5 trillion rubles this year and 1.2 – 1.7 trillion rubles in 2024. Those estimates came after 2022 — when Russian banks earned only 200 billion rubles ($2.5 billion) — turned out to be the industry’s worst year in a seven-year period.
Amid unprecedented sanctions in response to Russia’s invasion of Ukraine last year, the state-owned giant Sberbank registered a net profit of just 300 billion rubles, a 75% decline over 2021, and Russia’s second largest bank, VTB, reported a record loss of 756 billion rubles.
NCR Believes This Year’s Banking Sector Profits in Russia May Break the 2021 Record
In January – March 2023, however, Russian banks have already accumulated a record quarterly profit of 881 billion rubles, the Central Bank pointed out while also noting that excluding currency revaluation due to the weakening of the ruble, earnings amounted to 500 billion rubles.
Meanwhile, ahead of the conference, NCR also updated its predictions for this year. The rating agency expects even more positive results than the monetary authority. The company said that banks’ profits in Russia could reach 2.4 – 2.6 trillion rubles and break the 2021 record.
At the height of the crisis in 2022, the CBR sharply raised its key interest rate from 9.5% to 20%, which increased costs for banks through expensive deposits. The new forecasts coincide with its latest decision to keep the rate at the current level of 7.5%, for the fifth consecutive time, against the backdrop of moderate inflation held back by the Russian economy adapting to sanctions pressures.
“We will continue to help the banking sector adapt, we will create all the necessary conditions where possible,” Polyakova assured. She emphasized that the central bank’s policy of risk-based regulation and supervision as well as a decade of work on the financial recovery of Russian banks have helped them to survive the crises of 2020 and 2022 without significant losses. Nevertheless, they may still need up to 600 billion rubles to cover losses on assets blocked due to Western sanctions, according to the NCR.
Do you think banks in Russia will register record-breaking profits in 2023? Share your expectations in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Read disclaimer
Go to Source
Author: Lubomir Tassev
