The Central Bank of Russia (CBR) predicts that Russian banks will earn 1.9 trillion rubles (nearly $24 billion) by the end of 2023, according to Deputy Governor Olga Polyakova. This is comparable to the profit earned in 2021, marking a positive trend for the industry. The CBR’s baseline projections earlier this year estimated net profits in the banking sector to reach 1.2-1.5 trillion rubles in 2023 and 1.2-1.7 trillion rubles in 2024.
In 2022, Russian banks earned only 200 billion rubles, the industry’s worst year in a seven-year period. Sberbank, the state-owned giant, registered a net profit of just 300 billion rubles, a 75% decline over 2021, and VTB, Russia’s second-largest bank, reported a record loss of 756 billion rubles.
Record Quarterly Profits in 2023
However, in the first quarter of 2023, Russian banks have already accumulated a record quarterly profit of 881 billion rubles, according to the CBR. Excluding currency revaluation due to the weakening of the ruble, earnings amounted to 500 billion rubles. The National Credit Ratings (NCR) agency also updated its predictions for this year, projecting banks’ profits in Russia to reach 2.4-2.6 trillion rubles and break the 2021 record.
The CBR’s decision to keep the key interest rate at 7.5% for the fifth consecutive time has helped the banking sector adapt to sanctions pressures. The bank’s policy of risk-based regulation and supervision, along with a decade of work on the financial recovery of Russian banks, has helped them survive the crises of 2020 and 2022 without significant losses. However, the NCR estimates that banks may still need up to 600 billion rubles to cover losses on assets blocked due to Western sanctions.
In conclusion, the Russian banking sector is projected to earn record profits in 2023, despite facing sanctions and setbacks in 2022. The CBR and NCR predict positive trends for the industry, with banks’ profits potentially exceeding the 2021 record. The CBR’s policy of risk-based regulation and supervision has helped the banking sector adapt to sanctions pressures and survive crises.