Page 82 - RusRPTFeb24

normal operations, according to the Central Bank of Russia (CBR).
Thanks to a banking sector clean up that was launched by CBR governor Elvia Nabiullina when she took over in 2013 and is largely finished now, Russia banking sector went to the war in robust health and has been able to shrug off the multiple external shocks that the sanctions regime delivered.
The collective West was hoping to induce a financial crisis in Russia with the first round of extreme sanctions that were imposed in the first week of the outbreak of war almost two years ago, including the SWIFT sanctions that were largely unexpected, but fast action by the CBR to stabilise the situation headed off any disaster.
With the domestic market running hot, unemployment driven down to a record low of 2.9% and real incomes rising thanks to the military Keynesianism bump, conditions for banks were good in 2023 as they continued to work normally.
Banks earned monthly profits of around RUB250bn consistently throughout the year, although those profits fell to only RUB64bn in December, due to a range of one-off factors including dividend and end of year bonus payments, recognizing losses on old problem corporate loans and a traditional year-end increase in operating expense, which were up 38% to RUB352bn.
“Profits were driven by the recovery of core income, significant reduction in reserve expenses, and substantial income from currency revaluation,” the CBR said in its monthly report for December. “However, this result should not be viewed in isolation from the weak results of 2022 when the sector earned around RUB0.2 trillion. The average profit of the sector for 2022-2023 was RUB1.7 trillion, which is 27% lower than in 2021.”
The main headwind the sector will face in 2024 is high inflation which was running at 7.5% at the end of 2023, but the recent weekly inflation results suggest that a CBR 100bp rate hike in December is already having its desired effect and annualised weekly inflation in the last week of January was already down to 7.2%.
At the end of the year, the number of profitable banks reached 292 (90%) with a share in the sector's assets at 99%, significantly higher than in 2022.
82 RUSSIA Country Report February 2024 www.intellinews.com