Russian companies are track for their most profitable year in the last four years as a corporate recovery starts to gather momentum. Russian corporate profits in May (last available data) were up by RUB1,288bn ($2.03bn), which was about average for the year to date. Cumulative profits for the first five months of this year were RUB6,743bn, up by 38% on the pervious year.

In general while profits have grown slowly over the last three years, in 2019 the cumulative profits growth is well ahead of all three previous years and a sustainable recovery in corporate profits is underway, as is evident in the improving corporate confidence survey (see above).

This recovery started in the second quarter of last year but this year it clearly gathering some momentum now, as in every month this year corporate profits have been at least 20% or higher than in the previous year.

 

A very similar thing is happening in banking, which has also returned to profit. Russian banking sector aggregate net profit was up 60% year on year to RUB867bn ($13.8bn) in January-May 2019, according to the data released by the Central Bank of Russia (CBR), versus the RUB527bn posted for the same period of last year.

According to previous reports, in January-April 2019 Russian banks increased profits by 39.7% to RUB750bn, which makes the sector's profit for May alone RUB117bn, which was below the RUB163bn posted for April. That’s an ROE of 16%, with 5mo19 earnings up 64.5% y/y and YTD ROE of 23.7%.

The cumulative profits this year are running ahead of any year in the last five, when the economic crisis hurt the banking sector badly. The CBR previously said that profitable credit organisations dominate the banking sector.

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