Record profits in 2023
The CBR said that the banking sector earned a record net profit of 3.1 trillion rubles ($41.3 billion) in 2023, up by 46.5% from the previous year. The return on assets (ROA) and the return on equity (ROE) reached 3.1% and 28.9%, respectively, the highest levels in the history of the Russian banking system.
The CBR explained that the high profitability was driven by several factors, such as the low base effect of 2022, when the banking sector suffered from the impact of the COVID-19 pandemic and the Western sanctions. The CBR also noted that the banks benefited from the recovery of the economy, the expansion of lending, the reduction of loan loss provisions, and the favorable market conditions.
Lower profits in 2024
The CBR projected that the profitability of the banking sector will decline in 2024, but will remain at a relatively high level. The CBR estimated that the net profit of the banking sector will be around 2.5 trillion rubles ($33.3 billion) in 2024, down by 19.4% from 2023. The ROA and the ROE will decrease to 2.4% and 23.4%, respectively.
The CBR attributed the expected decline to the normalization of credit risk, which will require the banks to increase their loan loss provisions. The CBR also expected that the gradual increase of interest rates, which started in March 2023, will reduce the interest margin of the banks. Moreover, the CBR anticipated that the lending growth will slow down in 2024, as the demand for loans will weaken due to the higher interest rates and the lower income growth.
Risks and challenges
The CBR warned that the banking sector faces several risks and challenges in 2024, such as the uncertainty of the global economic situation, the volatility of the financial markets, the potential deterioration of the asset quality, and the intensification of the competition. The CBR also highlighted the need for the banks to improve their operational efficiency, to enhance their risk management, and to adapt to the digital transformation.
The CBR said that it will continue to monitor the situation of the banking sector and to implement the necessary measures to ensure its stability and resilience. The CBR also said that it will support the development of the banking sector and its contribution to the economic growth and the financial inclusion of the population.
