Russian President Vladimir Putin Contributor/Getty Images
Russian banks earned the equivalent of 34 billion euros last year, setting a new record, the country’s central bank announced on Tuesday.
Demand for mortgages and loans to finance large corporate acquisitions had boosted banking sector performance.
Experts expect that growth in corporate and consumer loans will slow in the coming year.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by an editor.
Even the Russian central bank is surprised at how well Russian banks performed last year. Last year they earned 3.3 trillion rubles or 34 billion euros. That corresponds to around 34 billion euros. In doing so, they have set a new record Central Bank announced on Tuesday. The result was “somewhat surprising,” said Alexander Danilov, head of the Banking Regulation Department of the Russian Central Bank, according to “Financial Times„.
The profits are a huge jump from the sector’s 200 billion rubles (2 billion euros) profit in 2022. That year, profits plunged 90 percent compared to the previous year due to Western sanctions following Russia’s invasion of Ukraine.
The performance of the Russian banking sector last year was boosted by demand for mortgages as well as loans to finance large corporate acquisitions, the central bank said in its statement. Mortgage loans rose by almost 35 percent last year compared to the previous year, as Russians rushed to buy houses at government-subsidized mortgage rates.
Read too
Two years of war and sanctions: An ifo study shows what the real state of Russia’s economy is
Massive military spending is driving the Russian economy
Russian authorities have begun phasing out the concessional mortgage loan program, according to the independent Russian news site “The Bell” reported in September. At that time, mortgage interest rates in Russia were around 15 percent, but the subsidized mortgage interest rate was eight percent. Families received a larger discount with a mortgage interest rate of six percent.
As the Russian Central Bank has now explained, lending to companies in Russia increased by around 20 percent last year compared to the previous year. The central bank did not specify what the loans were used for. What is known, however, is that Russian companies have been buying up assets from international companies that have exited the market.
The central bank’s latest report is another indication of the unusual resilience of the sanctions-hit Russian economy, nearly two years after the start of the war in Ukraine.
Read too
Weak ruble and high inflation: Credit institute warns Russia of a ‘Waterloo’ moment due to interest rate hikes
Much of the country’s growth is reportedly due to massive military and government spending. However, the Russian economy is at risk of overheating, the country’s top central banker, Elvira Nabiullina, said in December. At that time, she raised key interest rates to 16 percent in order to cool down demand.
On Tuesday, Reuters reports, Danilov of Russia’s central bank said growth in consumer and business loans is expected to slow next year, which in turn will affect banks’ profits.
Read the original article Business Insider.