By Elena Fabrichnaya and Alexander Marrow
MOSCOW (Reuters) -Russian banks made record annual profits of 4 trillion roubles ($40.7 billion) in 2024, the central bank said on Thursday, as Russia’s financial sector continued to rebound from sanctions, riding a wave of high interest rates and solid loan growth.
The central bank’s high key rate, now at 21%, has boosted banks’ net interest margins, but lending growth is starting to slow as soaring borrowing costs deter some companies from seeking financing for development projects, preferring to hold funds on deposit instead.
Without including profits earned by subsidiaries and the negative revaluation of securities, the sector’s profits would be 3.4 trillion roubles, the bank said in a report, without providing comparable data for 2023.
It has already warned that banks’ profits will slip in 2025 as credit risks grow and margins are squeezed.
German Gref, CEO of dominant lender Sberbank, has called high interest rates a “colossal challenge” for businesses and banks, while Andrey Kostin, head of No. 2 bank VTB said stricter regulation would also eat into banks’ profits.
Russian banks’ net interest income rose 11% to 6.7 trillion roubles in 2024, the central bank said.
Growth in corporate, consumer and mortgage lending all slowed in 2024, the bank said. The slowdown was most noticeable in mortgage lending, where growth fell to 12.4% last year from a record 34.5% in 2023.
Mortgage issuance, at 4.9 trillion roubles, was almost 40% lower than the year before.
‘DIFFICULTIES MAY ARISE’
Alexander Danilov, director of the central bank’s banking regulation and analytics department, advised against comparisons with 2023 as he said that year was an exception in terms of overheating and the colossal volume of state support.
Soaring government spending on the conflict in Ukraine has boosted economic growth, but also fuelled inflation, forcing the central bank to hike interest rates to their highest in over 20 years and raising concerns of economic overheating.
Corporate loan growth of 17.9% in 2024 was tempered by a 4.1% increase in the volume of non-performing loans (NPL), though the share of NPLs dropped to 3.8% due to portfolio growth.
A leading think tank advising the government said last week that Russia could face a wave of corporate bankruptcies this year as the share of businesses with risky debt levels doubled in 2024 and many large companies have complained about high interest rates raising their borrowing costs.
“Companies in most industries are still quite profitable, which allows them to service loans even at current rates,” the bank said. “However, difficulties may arise for some companies with a high debt burden.”
($1 = 98.3000 roubles)
(Reporting by Elena Fabrichnaya in Moscow and Alexander Marrow in London;Editing by Mark Trevelyan and Toby Chopra)
