ACRA experts predicted profit for banks despite the crisis

Banks can show profit as early as 2022, and in 2023 increase it to almost 1 trillion rubles, ACRA predicts. Credit institutions are quickly recovering against the background of the crisis,

Russian banks in the crisis year of 2022 can avoid losses - as follows from the forecast of the Analytical Credit Rating Agency (ACRA), which studied RBC, their profit could be about 100 billion rubles. In 2023, it may grow to 950 billion rubles, ACRA experts believe.

At the end of 2021, the net profit of the banking sector amounted to a record 2.4 trillion rubles. But with the onset of the crisis, largely caused by sanctions against the Russian financial sector, they suffered a serious loss. In January-June it amounted to 1.5 trillion rubles. Prior to this, according to the results of the first half of the year, the financial result of the sector has never been negative since 2012 since 2012. According to the results of ten months, the loss decreased to 400 billion rubles, the Central Bank reported (detailed reporting of banks and the sector as a whole is still hidden).

“The loss in the first half of this year was largely formed as a result of fluctuations in the foreign exchange market and interest rates, which is a one-time event and, other things being equal, is unlikely to happen again in 2023. The formation of the financial result was also influenced by the creation of reserves, the volume of which, according to ACRA’s expectations, will not be so high in 2023,” analysts believe.

In the second half of the year, there was both an improvement in the industry's aggregate financial result and an increase in the number of profitable credit institutions. In the third quarter of 2022, the profit of banks amounted to about 700 billion rubles. “The traditional sources of operating income — interest and commission income — have become factors for generating profits,” ACRA noted.

Other experts interviewed by RBC believe that by the end of 2022, banks will bring the financial result to near-zero values ​​or a slight increase. The DIRECTOR of banking ratings at Expert RA, Lyudmila Kozhekina, also explains the reduction in losses by the weakening of the ruble.

What will happen next year

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In 2023, banks should maintain stability due to the stability of interest and commission income and, as a result, increase profits to 950 billion rubles, according to ACRA. If they manage to keep the cost of risk at the level of 2021, then pre-tax profit could significantly exceed 1 trillion rubles. The National Rating Agency (NRA) agrees with this forecast.

“In our positive scenario, which takes into account the absence of new economic shocks, a soft exit from regulatory easing and a quick adaptation of the economy to new conditions, the profit of the Russian banking sector in 2023 is expected to reach up to 1 trillion rubles,” said Irina Melnikova, Senior Managing Director of the NRA. .

“Despite the further reduction of the key rate expected by ACRA (6.5% at the end of 2023), the projected growth of the loan portfolio will allow increasing the volume of interest income. The relatively higher maturity of assets compared to liabilities will allow banks to maintain margins in the face of declining rates and the simultaneous need to compensate for the outflow of client funds recorded in 2022, which will curb the decline in deposit rates,” analysts predict. Growth in fee and commission income may be less sustainable due to lower economic activity, which will affect the number of transactions in the corporate segment. The main driver of fee income growth will be retail lending, where fee income is generated at the time loans are issued.

The financial result will be negatively affected by the outflow of personnel, primarily employed in the field of IT, and the possible need for investments in the replacement of software and banking equipment. This may lead to a moderate decrease in operational efficiency. Also, banks will need to complete the reserves for 850 billion rubles, ACRA estimates.

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What happens to loans

The portfolio of consumer loans for ten months of 2022 increased by only 1.7%, and a positive monthly increase began only in the second half of the year, says Kozhekina: “By the end of 2022, the growth of the portfolio will be within 3-4%. Mortgage loans grew most actively this year (+12.6% over the ten months of 2022), supported by state programs. We expect that by the end of 2022, the mortgage loan portfolio will add about 15-16%.”

The NKR believes that unsecured retail may grow by 5-7% this year - the traditional growth in the population's demand for loans in December will help the dynamics of the segment. In addition, some banks may improve their offers for such loans on the eve of the new year, since from January 1, the Central Bank will tighten regulation and direct quantitative restrictions will be introduced, which can significantly cool down the issuance of the most risky loans, says Egor, Deputy Director of the Financial Institutions Ratings Group of the NKR Agency. Lopatin. According to the results of 2022, the volume of mortgage loans issued will amount to 4.7-4.8 trillion rubles, in the car loan segment, the volume of loans issued will decrease by 2-3%, according to the NKR.

According to ACRA estimates, demand for consumer loans will be high in 2023 due to a 1% decline in real incomes, as well as due to the pent-up demand effect. As a result, the growth of the portfolio of unsecured loans following the results of next year may exceed 15%.

“Next year, retail lending will continue to be limited by the unstable geopolitical and economic environment and the decline in household incomes,” Kozhekina argues. “Against the background of these risks, borrowers will be more balanced and cautious about the increase in debt burden. In 2023, for consumer loans, the growth of the portfolio in the range of 10-15% is most likely.”

The volume of the mortgage portfolio in 2023 will increase by 13%, while by the end of 2022 it will grow by 16%, ACRA predicts. Expert RA, on the contrary, expects the growth rate of the mortgage loan portfolio to be higher than in 2022 due to the extension of the preferential mortgage program, now at 8%, which in the past few years provided more than half of mortgage loans, and lower interest rates .

Corporate lending may grow by 10–12% in 2022. Such a significant growth for the segment will also be associated with the adaptation of the business to new macro conditions - the lengthening of supply chains, which requires additional costs, as well as an increase in domestic borrowing, predicts Lopatin. ACRA expects that the further growth of the corporate portfolio of Russian banks by the end of 2023 will be about 10%.

Losses of Russian banks decreased by more than ₽1 trillion Finance

Loan quality

According to ACRA, the quality of banking assets remains under control, including due to the restructurings carried out: the share of overdue loans in the corporate segment decreased from 6.7% in 2021 to 5.7% in January-October 2022, and in the retail segment - increased, but only from 3.9 to 4.1%. In 2023, the quality of loans may slightly worsen against the backdrop of a slow recovery in economic growth - for the corporate portfolio, delinquency will increase by 0.6 percentage points, for retail - by 0.3 percentage points.

The volume of restructured loans to individuals is 380.5 billion rubles. as of November 1, 2022, is not significant, Kozhekina believes. The main deferred pressure will come from loans to legal entities. Including loans that were restructured during the pandemic and have not yet been repaid, the total share of corporate loans that have been renegotiated could exceed 20%. Not all of these loans are potentially problematic, but the default of even several large borrowers can significantly affect the financial result of the banking sector, the expert concludes.