High interest rates took a bite out of consumer lending and took a toll on banks' profits in September.
Russian banks' profits dropped in September as consumer lending growth slowed significantly, the country's central bank said on Friday, as Russians adapted to sharp interest rate hikes in August and September while authorities sought to defend the rouble.
The Bank of Russia made an emergency 350-basis-point hike to 12% in mid-August, before raising rates again in September to 13%. Economists expect another increase in borrowing costs when the central bank meets next week.
Russian banks' profits dropped to 296 billion roubles (€2.92 billion) in September from 353 billion roubles in August.
Russia's number two lender VTB Bank last month said high rates would take a toll on banks' profits in 2024, although the sector is set for record profits this year.
"We have about 15 billion roubles of falling interest income per one percentage point increase in the key rate," said the bank's CFO Dmitry Pyanov, according to Reuters.
"Nothing will prevent us from ending 2023 with record figures," Pyanov said.
The profit of the overall bank sector in Russia in January-September was 2.4 trillion roubles, and it could reach as much as 3 trillion roubles by the end of the year, the central bank said.
Foreign currency reserves are decreasing
Companies' foreign currency funds held in banks are likely to decrease in the coming months due to the introduction of new capital controls this week, the bank said.
From Monday, President Vladimir Putin's decree on mandatory FX sales came into force, obliging 43 groups of exporters to repatriate 80% and sell 90% of FX revenues.
Households' foreign currency funds meanwhile continued declining in September, down by $900 million (€850 million).
"This may have been caused by a desire to convert foreign currency into roubles at a high exchange rate," the bank said in a report.
The rouble slumped to a more than 18-month low earlier this month, before capital controls were imposed, but has since recovered ground, strengthening to a more than three-week high on Friday.