Russia’s Banking Profit Outlook: Sectorwide Gains in 2023 and Beyond
According to the Expert RA rating agency, the banking sector is poised to surpass 3 trillion rubles in profit by the close of 2023. Yet more than three quarters of that profit is expected to come from the country’s top ten banks, a group that generally reported losses in 2022. This contrast highlights how a handful of lenders are steering the sector’s earnings trajectory, a point noted by TASS in coverage of the development.
Analysts describe the anticipated outcome as an all time high for the market. Even with higher interest rates, large banks are projected to preserve their net interest margins. They plan to do so by sustaining mortgage portfolio profitability through a combination of increased consumer loan rates and preferential lending schemes that keep credit demand alive while managing risk.
Foreign exchange revaluation, driven by the ruble’s depreciation, is also expected to bolster sector profitability. However, experts doubt the ruble will return to the 80–85 ruble per US dollar range before year-end. The forecast remains sensitive to external shocks, including the possibility of intensified sanctions affecting the financial sector and the manufacturing sector, which could revise the outlook for banks’ earnings and capital adequacy.
In the first half of 2023, Russia’s ten largest banks reported record profitability, with sectorwide results reaching 1.7 trillion rubles. Banks expanded net interest margins and sharpened focus on the marginal retail segment. They also built provisions in the prior year to cushion potential impacts on 2023 results. Yet Expert RA notes that capital adequacy standards for the biggest banks still sit in a cautious zone, limiting growth potential and constraining expansion plans.
Earlier, Prime Minister Mishustin cautioned against excessive optimism, underscoring the need for prudence amid evolving conditions and potential risk factors that could reshape the sector’s trajectory.