In 2024, Russian banks achieved record annual profits of 4 trillion roubles ($40.7 billion), as reported by the central bank on Thursday. The financial sector in Russia continued its recovery from sanctions, benefiting from high interest rates and robust loan growth.
The central bank's key rate of 21% has increased banks' net interest margins. However, the growth in lending is slowing down as steep borrowing costs are discouraging some companies from seeking financing for development projects, leading them to hold funds in deposits instead.
Excluding profits from subsidiaries and negative revaluation of securities, the sector's profits would amount to 3.4 trillion roubles, according to the central bank. The bank did not provide comparative data for 2023. It has cautioned that bank profits are expected to decrease in 2025 due to escalating credit risks and narrowing margins.
The CEO of Sberbank, German Gref, described the high interest rates as a significant challenge for businesses and banks, while the head of VTB, Andrey Kostin, mentioned that stricter regulations would also impact banks' profits.
The central bank stated that Russian banks' net interest income grew by 11% to reach 6.7 trillion roubles in 2024. Growth in corporate, consumer, and mortgage lending slowed down, particularly in mortgage lending, with growth dropping from 34.5% in 2023 to 12.4% in 2024. Mortgage issuance decreased by almost 40% to 4.9 trillion roubles.
Alexander Danilov, director of the central bank's banking regulation and analytics department, advised against comparing 2024 to 2023 due to the exceptional circumstances of the latter year, including overheating and significant state support.
Heightened government spending on the conflict in Ukraine has fueled economic growth but also inflation, leading to the central bank raising interest rates to their highest level in over two decades. Concerns about economic overheating have emerged.
While corporate loan growth in 2024 was 17.9%, there was a 4.1% rise in non-performing loans (NPLs). Nevertheless, the NPL share decreased to 3.8% due to portfolio expansion.
A prominent think tank advising the government warned that Russia may witness a wave of bankruptcies this year, citing a doubling of the proportion of businesses with risky debt levels in 2024. Many large companies have expressed concerns about high interest rates increasing borrowing costs.
The exchange rate in 2024 was $1 = 98.3000 roubles.