By Elena Fabrichnaya and Alexander Marrow
MOSCOW (Reuters) -Russia’s dominant lender Sberbank reported on Thursday a small drop in third-quarter profit to 411.1 billion roubles ($4.2 billion), hit by a one-off tax revision, slower loan growth and a jump in provisions as interest rates soar.
Sberbank made a record 1.5 trillion rouble profit in 2023, a more than fivefold increase on the previous year, as Russia’s banking sector recovered from the impact of financial sanctions over the country’s actions in Ukraine.
The Bank of Russia raised its key interest rate by 200 basis points to 21% last week. Sky-high borrowing costs are already deterring some companies from seeking financing for development projects, preferring to hold funds on deposit instead.
“During the reporting quarter, consumer activity and retail lending slowed down, while corporate loan portfolio growth remained robust,” Sberbank CEO German Gref said in a statement.
Finance chief Taras Skvortsov said the bank was raising its corporate loan growth forecast for 2024 to 18-21% from 14-17%, but now expects slower growth in retail lending this year as soaring interest rates bite.
Sberbank, which dominates Russia’s banking sector with more than 109 million retail clients, posted nine-month profit of 1.23 trillion roubles, up 6.8% year on year, and return on equity exceeding 25%.
Skvortsov said the 0.1% year-on-year drop in third-quarter profit was a one-time factor caused by a revision in the income tax rate applicable to deferred tax assets and liabilities.
He said Sberbank expected to earn “significant” profits in the fourth quarter.
Total provision coverage of impaired loans rose slightly to 127.3% at the end of the quarter, but Sberbank’s net provision charge against credit quality deterioration jumped by more than 160% year on year.
“The dynamics of this indicator are significantly influenced by the growth of (the) credit portfolio and the increase in credit risk in (the) retail segment amid rising interest rates in the economy,” Sberbank said in a statement.
($1 = 97.0500 roubles)
(Reporting by Alexander Marrow in London and Elena Fabrichnaya and Ksenia Orlova in Moscow; Editing by Mark Potter, Kirsten Donovan)
