(MENAFN) During a conference on Tuesday, Central Bank Deputy Governor Olga Polyakova expressed optimism regarding the profitability of Russian banks in 2024, suggesting that the current year could surpass the record-breaking profits achieved in 2023. Despite the challenging economic environment exacerbated by Western sanctions, Polyakova highlighted factors such as increased lending activities, a rebound in basic income, reduced reserve expenses, and gains from currency revaluation contributing to the robust performance of Russian banks.
In 2023, Russian banks reported profits totaling 3.3 trillion rubles (USD35.4 billion), driven by a surge in mortgage, consumer, and corporate lending, even amidst the backdrop of escalating geopolitical tensions and stringent economic sanctions imposed by Western nations. Notably, the profitability of banks remained resilient despite a sharp increase in the key interest rate, which rose from 7.5 percent to 16 percent.
Polyakova's remarks signal an upward revision from the Central Bank's previous forecast, which estimated the banking sector's profits for 2024 to be in the range of 2.3-2.8 trillion rubles (USD24.6 - USD30 billion) in March. This revised outlook reflects growing confidence in the resilience and adaptability of the Russian banking sector in navigating challenging geopolitical and economic landscapes.
The banking sector in Russia faced unprecedented pressure from Western sanctions in 2022, following Moscow's military intervention in Ukraine. Most Russian banks were effectively isolated from the Western financial system, with key institutions prohibited from accessing the SWIFT clearing mechanism. However, the Bank of Russia demonstrated preparedness to mitigate the impact of sanctions, leveraging past experience from earlier rounds of sanctions imposed in 2014.
Despite ongoing sanctions and geopolitical tensions, the Russian banking sector has demonstrated remarkable resilience, with 2023 marking a historic milestone in terms of profitability. Polyakova's optimism for 2024 underscores the sector's ability to adapt to evolving challenges and capitalize on emerging opportunities amidst a complex geopolitical and economic landscape.
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