Page 105 - RusRPTJul23

The profit was supported by lower provisions (-25% compared to April) and growth in core revenues, with interest income up by 5% and non-interest income up by 8%, driven by business expansion. However, banks' income from currency revaluation significantly declined (16bn rubles in May compared to 82bn rubles in April) as the exchange rate of the ruble remained largely stable in May.
The number of profitable banks increased to 237 in May (73% of the total) compared to 230 in April (71%). As of January to May, the number of profitable banks reached 268 (82% of the total), accounting for 98% of the sector's assets.
The improved profitability of the banking sector in May demonstrates the resilience and effectiveness of banks in managing their operations. The lower provisions indicate a more favorable credit environment, with reduced risks of loan defaults. Furthermore, the growth in core revenues reflects the sector's ability to generate income from its core banking activities, such as lending and fee-based services.
Despite a profit of 273bn rubles, the balance sheet capital of the banking sector decreased by 317bn rubles to 12.5 trillion rubles due to a large bank's payment of record dividends amounting to 565bn rubles for the year 2022.
Information regarding the dynamics of regulatory capital in May will be available after the publication of this material. However, considering the dividend payout, a slight decrease within 0.5 percentage points is likely. Nevertheless, the capital buffer will remain above 6 trillion rubles.
In April, the indicator of total capital adequacy (N1.0) decreased by 0.05 percentage points to 12.61%. This was due to the accelerated growth of risk-weighted assets (+2.7%) compared to total capital (+2.2%). In April, regulatory capital increased by 298bn rubles, primarily driven by the financial result accounted for in the capital and the reclassification of an existing deposit into subordinated debt by one of the major banks. The growth in risk-weighted assets in April (+2.7%) was influenced by positive loan dynamics (+1.7%).
The reduction in balance sheet capital due to dividend payments highlights the distribution of profits within the banking sector. While banks may have achieved substantial profits, the allocation of these profits towards dividends can impact the capital available for future growth and investment.
Maintaining an adequate capital buffer is crucial for banks to ensure financial stability and absorb potential losses. The regulatory capital requirements serve as a safeguard against risks and help maintain the overall health of the banking system.
105 RUSSIA Country Report July 2023 www.intellinews.com