Russian banking sector profits recover in June

MOSCOW: Profits in Russia's banking sector rose to 70 billion roubles ($975 million) in June from just 500 million roubles in May, which included some weeks of lockdown due to the coronavirus pandemic, the central bank said in a report on Friday.

Despite the recovery, the central bank said the June figure was much lower than the average monthly profit in 2019, which stood at around 140 billion roubles.

Three benchmark interest rate cuts by the central bank this year and declining household incomes linked to the economic fallout from the coronavirus pandemic have put banking sector funding under pressure.

The report said bank retail deposits increased 1.9% in June, compensating for seasonal outflows from January to May and people stockpiling cash when restrictive health measures were introduced to curb the spread of the novel coronavirus in March.

This increase was driven primarily by a family support programme that saw the government hand out around 290 billion roubles to citizens, it said, with Russia's largest lender Sberbank attributing 3% growth to such payments.

In the first six months of 2020, deposits grew 1.2%, while Russian banks made a profit of 630 billion roubles ($8.1 billion).

However, as the central bank noted in a recent review of baking sector liquidity, long-term rouble deposits - an important source of bank funding - fell for the first time since early 2018, with short-term deposits up to 30 days driving the growth.

Chief analyst at Sberbank Mikhail Matovnikov said customer behaviour had changed during the pandemic, with people trying to avoid visiting banks and therefore opening accounts less often, adding that consumption had decreased more than income, allowing people to accumulate savings.

"We find ourselves in a state of crisis, and this has to affect the deposit base," said the CEO of Moscow-based management consultancy firm Frank RG, Yuri Gribanov.

"The state of market stagnation could last from six months to a year."