Russian banking sector posts steady growth in profits
The Russian banking sector, which held up surprisingly well even in the past difficult year, continues to increase profitability. This April, a year after banks were hit by a lockdown, they posted the biggest profits since 2014.
Russian banks earned the strongest profits in five years in January-April 2021, reports bneIntelliNews adding that the profitability of the sector continued to follow the course of 2019, which became the first year of strong growth after the economic crisis of 2014. In the first four months of 2021, bank profits amounted to 779 billion rubles ($10,6 billion), while during the corresponding period of 2020, Russian banks earned only 611 billion rubles, as their performance had been hit by the pandemic in April. However, this year’s figure also exceeds the result of 2019 (750 billion rubles in January-April) and is significantly ahead of the preceding three years. The outlook for the banking sector for 2021 is good amid expectations of strong economic growth and good performance of Russia’s corporate sector, which is meant to earn the largest profits in five years.
In April, the sector saw an acceleration in both corporate and retail lending. The latter was fuelled by a state-sponsored mortgage subsidy programme and growing unsecured loans. Growth in mortgages also contributed to an increased inflow of funds from the population into escrow accounts, which added 13,2%, or 208 billion rubles. Meanwhile, borrowers’ overdue debts slightly decreased in April due to rescheduling claims on problem loans to large banks.
In addition, banks saw a significant rise in household funds (2,9%, or 942 billion rubles) exclusively at the expense of current accounts. It can be explained by the fact that salaries and part of social benefits including pensions for May were paid in advance in April due to the declared non-working days between holidays in May. Thus, a moderate outflow of deposits can be expected in May amid seasonal growth in consumer spending.
An increase in public funds was even more impressive and amounted to 12,9%, or 0,9 trillion rubles. It was caused by large tax revenues to the budget (payment of VAT for the first quarter of 2021 and annual income tax for 2020) against the backdrop of moderate government spending. Besides, Russia’s Ministry of Finance attracted about 490 billion rubles in April 2021 through the placement of state bonds with Russian banks buying over 85% of these bonds.