The dynamics of lending by the banking sector to the economy have entered the area of positive values. It is to be noted that in October both retail and corporates segments of the portfolio increased.
The banking sector as a whole demonstrates a good financial result: in January-October 2016 it received Rb 714bn worth of profit (it is four times more than in the respective period of 2015).
Year-on-year profitability of banking assets is gradually recovering. Within 9 months of 2016, its level amounted to 1.0% year-on-year which is higher than the level of 2015 (0.2%) when banks’ profit was the minimum and that of 2014 (0.9%). It is to be noted that despite the fact that there was considerable growth in the banking sector’s profit its volume is still rather moderate as compared to the pre-crisis levels. In 2011-2012, the profitability of banking assets used to exceed 2% year-on-year.
The thing is that growth in profits was solely the result of slowdown of formation of provisions for possible losses, that is, the so-called crisis component. So, within the three quarters of 2016 growth in banks’ provisions for possible bad loans and other assets amounted to Rb 358bn which is much lower than in the respective periods of 2014 (Rb 649bn) and 2015 (Rb 963bn). So, reduction of allocations for possible losses, that is, when the level of risks in the banking sector started to grow slower, became the main factor behind growth in profitability of the banking sector in 2016.
At the same time, the profit from regular banking transactions, that is, the profit less growth in provisions for possible losses and the net income from revaluation of currency accounts rose, too. Within the three quarters of 2016, on such transactions banks earned Rb 1,035bn which is 29.0% more than in the same period of 2015 (Rb 802bn). As regards that component of revenues, within a year the profitability of banking assets increased somewhat, having amounted to 1.7% year-on-year as compared to 1.4% year-on-year in H1 2015. For comparison, until 2014 in H1 banks used to receive profit from regular transactions which was equal to 2.7%-2.9% year-on-year of the volume of average assets. It means that the profitability of the main banking operations is currently almost half as high than its normal level which is typical of the periods of sustained development of the banking sector.
As before, the Sberbank accounts for a larger portion of profits earned by banks. Within three quarters of 2016, the Sberbank’s profit amounted to Rb 555bn, that is, 76% of the profit of the entire banking sector. In other words, the Sberbank which accounts for less than 30% of the aggregate assets of the banking sector received five times more profit than all other banks.
However, other private banks often break even with their profitability being close to the zero level. The private segment of the banking sector is still highly unattractive in investment terms for bank owners. Support of banks on the part of the private capital is limited primarily to the idea that it is necessary to underpin viability of the existing business in a situation of a lack of substantial investments in priority development. Most probably, the above factor will result in further consolidation of positions of state banks on the market of banking services and growth in concentration of assets in the banking sector.
Мikhail Khromov, Director of the Structural Research Center