Page 85 - RusRPTJul21

8.1.1 Earnings
The sector's net profit in May amounted to RUB216bn ($2.93bn) with a return on equity of 23.6% in annual terms, Profits in May were 7% higher than the result of April of RUB202bn.
The cumulative profit of the sector over the first five months of the year almost reached 1 trillion ($13.6bn). It is likely that in the absence of unexpected of shocks, the annual profit will exceed the previous forecast of 1.5–1.7 trillion . and will be about 2 trillion .
The number of profitable banks increased to 234 from 221. At the same time, the share of profitable banks in the assets of the sector at the end of five months of 2021 remained at the level of 97%.
The net profit of Russian banks will likely exceed the central bank’s previous forecast of RUB1.5–1.7 trillion in 2021 and will be around RUB2 trillion , the regulator said.
Russian banks are currently earning their best profits in five years and profits are now ahead of every year for the last five years on a cumulative basis too. Part of the uplift for the sector is the improving economic environment and the fall in non-performing loans (NLPs) that has allowed many banks to release capital held as provisions against bad debt that can be added to their bottom line.
The Central Bank has revised its profit forecasts for the banking sector upwards from RUB1.5-1.7 trillion ($20.49-23.22bn) to 2 trillion ($27.32bn) for 2021. So long as there aren’t any other shocks, the lending expansion that sustained the economy last year and in 1Q will roll ahead, slowed by expected rate hikes though they’d also increase interest earnings. There are some leading indicators that should give us pause. The growth rate of unsecured borrowing by retailers accelerated in May vs. April — 1.6% vs. 2.2%. Overall, it’s clear that Russian corporates aren’t facing any debt problems. The pain is going to really be felt by households. But the unsecured borrowing by retailers reflects both the burst of demand working itself out and also uneven impacts of price control measures and inflation on companies’ profits:
85 RUSSIA Country Report July 2021 www.intellinews.com