Page 114 - RusRPTApr24

risk (0.4%), net interest income decreased both compared to 2M23 and 4Q23 due to rising funding costs after the Bank of Russia increased its key rate. Net interest margin fell to 2.4% (3.1% in 2023), while the operating expense to income ratio increased to 45% (from 36% in 2023).
Net profit for 2M24 amounted to RUB 61.3 billion. (-33% y/y), which corresponds to a return on equity of 17% (22% in 2023). Taking this into account, the capital adequacy ratio (N20.0) remained at the level of the end of 2023 (10.6%). VTB management noted in the comments that based on the results of 1Q24, profit is expected to be more than RUB 100 billion. In April, additional income is also expected to be received from the transfer of blocked assets to a “third party” (previously, the bank forecast income from working with blocked assets at 100 billion rubles for 2024).
8.2 Central Bank policy rate
Russia’s Central Bank of Russia (CBR) kept rates on hold at 16% as expected at its monetary policy meeting on March 22, despite slowing inflation and falling inflation expectations amongst the population. (chart)
The central bank said that “current inflation pressures are gradually easing but remain high” and that “seasonally adjusted price growth in February remained at its January level” (of around 6-7% in annualised terms). The central bank more or less repeated its view that “it is premature to judge the pace of future disinflationary trends” and maintained its assessment that “the balance of inflation risks is still tilted to the upside”.
Russian inflation declined very slightly in March, falling from March 12 to March 18 by 0.1% to 7.6% from 7.7% in February, according to Rosstat.
Russia’s economy is running hot having put in 3.6% growth in 2023 thanks to heavy military spending that has produced a military Keynesianism effect to boost growth far beyond Russia’s economic potential currently estimated to be 0.3-0.5%.
That has driven up inflation and forced the CBR to hike rates to growth-crushing level of 16% from 13% at its December meeting. As the inflation is not dependent on monetary emissions, the central bank will have few opportunities to cut rates this year.
However, inflationary pressures do seem to be in retreat as global inflation has been falling steadily in the last six months.
Food prices in Russia fell for the first time since late summer last year, although rising airfare prices contributed to a significant rise in prices for services. Retail prices for gasoline, as well as for non-food products in general,
114 RUSSIA Country Report April 2024 www.intellinews.com