Russian banks maintain recovery, double profit in 1H21

Russian banks maintain recovery, double profit in 1H21
By bne IntelliNews July 28, 2021

The Russian banking sector posted net profit of RUB204bn ($2.77bn) for June 2021, with the total profit for 1H21 amounting to RUB1.2 trillion, almost double year on year from RUB630bn for the same period of last year, and making 22% annualised return on equity (ROE) for 1H21, according to the preliminary data from the Central Bank of Russia (CBR).

As followed by bne IntelliNews, in May Russian banks extended their bull run with RUB216bn in profits, earning their best numbers in five years.

"It was a profitable 1H21 for banks, with earnings almost doubling versus the same period last year, helped by strong retail lending, a recovery in revenues and lower provision charges," Sberbank CIB commented.

The CBR estimates that the banking sector's profit could top RUB2 trillion for 2021 overall, barring unforeseen events.

The main drivers behind profitability gains were general business growth, lower provision expenses (down from RUB729bn in 1H20 to RUB298bn in 1H21), rising net interest income from higher rates (up 13% y/y in 1H21), and fee and commission income (up 27% y/y in 1H21, helped by a low base). 

Total banking sector assets rose 6% year to date to RUB110 trillion (up 16% y/y) as of end of June 2021. Corporate loans were up 5% in Fx-adjusted terms ytd in 1H21, while retail loans were up 11.8%, with mortgages up 10.6% in FX-adjusted terms in 5M21 and consumer loans up 17.1% y/y FX-adjusted.

On the liabilities side, retail deposits fell 1.4% ytd in 1H21 (up 3% y/y), a reflection of low interest rates on deposits and more attractive yields in the bond markets. On the corporate side, deposits rose 3% ytd and 3.7% y/y in 1H21 in FX-adjusted terms.

"It will be interesting to see whether rising deposit rates start to stimulate inflows of funds from retail customers," Sberbank CIB analysts suggest looking forward.