Page 69 - RusRPTAug23

8.1.1 Earnings
The financial sector reported robust performance in June, with a net profit of 314bn rubles, reflecting an annual return on capital of 29.8%. This result marks a 15% increase compared to May's profit of 273bn rubles. Overall, the sector has already accumulated earnings of 1.7 trillion rubles in the first half of 2023.
Approximately half of the June profit was attributed to gains from currency revaluation, amounting to 153bn rubles (G). The weakening of the ruble by 7% in June contributed to these gains. Additionally, profits were bolstered by income from securities (around 30bn rubles) and dividends from subsidiary companies (approximately 33bn rubles). However, the core profit (H), excluding these factors, declined to 125bn rubles from 250bn rubles in May.
The decline in core profit can be attributed to the anticipated increase in provisions for corporate loans and other assets, which rose to 204bn rubles (+108bn rubles compared to May). The cost of risk for corporate loans in June (~1.1%) is in line with historical averages (1–1.5%) and in line with our forecast estimates (J).
The number of profitable banks increased to 245 in June, accounting for 75% of the total number of banks. This figure is higher than the 237 profitable banks (73%) reported in May. Over the first half of 2023, a total of 271 banks (83% of the sector) achieved profitability, representing 99% of the sector's assets (K).
The financial sector's performance in June indicates resilience and adaptability amidst market fluctuations and economic challenges. The gains from currency revaluation showcase the sector's ability to navigate currency volatility and take advantage of favorable exchange rate movements.
Furthermore, income from securities and dividends from subsidiaries demonstrate the sector's ability to capitalize on investment opportunities and generate additional revenue streams. However, the decline in core profit highlights the importance of prudent risk management and provisions to address potential credit risks.
The increase in profitable banks signifies overall sector strength and the ability of financial institutions to generate profits in a challenging economic environment. As the sector continues to recover from the impact of previous uncertainties, banks have focused on maintaining sound asset quality and capital adequacy.
69 RUSSIA Country Report August 2023 www.intellinews.com