Russian banks reap record profits in 2024, helped by high rates and loan growth
MOSCOW, Jan 30 (Reuters) - Russian banks made record annual profits of 4 trillion roubles ($40.7 billion) in 2024, the central bank said on Thursday, as Russia's financial sector continued to rebound from sanctions, riding a wave of high interest rates and solid loan growth.
The central bank's high key rate, now at 21%, has boosted banks' net interest margins, but lending growth is starting to slow as soaring borrowing costs deter some companies from seeking financing for development projects, preferring to hold funds on deposit instead.
The central bank has already warned that banks' profits will slip in 2025 as credit risks grow and margins are squeezed.
German Gref, CEO of dominant lender Sberbank (SBER.MM), opens new tab, has called high interest rates a "colossal challenge" for businesses and banks, while Andrey Kostin, head of No. 2 bank VTB (VTBR.MM), opens new tab said stricter regulation would also eat into banks' profits.
Growth in corporate, consumer and mortgage lending all slowed in 2024, the central bank said in a report. The slowdown was most noticeable in mortgage lending, where growth fell to 12.4% last year from a record 34.5% in 2023.
Mortgage issuance, at 4.9 trillion roubles, was almost 40% lower than the year before.
Corporate loan growth of 17.9% in 2024 was tempered by a 4.1% increase in the volume of non-performing loans (NPL), though the share of NPLs dropped to 3.8% due to portfolio growth.
A leading think tank advising the government said this week that Russia could face a wave of corporate bankruptcies this year as the share of businesses with risky debt levels doubled in 2024.
Many large companies have complained about high interest rates raising their borrowing costs.
Russia's largest mobile operator, MTS, in November blamed an 88.8% drop in third-quarter net profit on increased interest expenses, while state-owned monopoly Russian Railways is facing a $4 billion rise in interest payment costs this year.
"Companies in most industries are still quite profitable, which allows them to service loans even at current rates," the bank said. "However, difficulties may arise for some companies with a high debt burden."
($1 = 98.3000 roubles)
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