Russian Banks Navigate Interest Rate Challenges Amid Record Profits

In 2024, Russian banks achieved record profits of 4 trillion roubles despite rising credit risks and high interest rates that are starting to slow lending growth. While profits surged due to a 21% key interest rate, experts warn of future challenges as borrowing costs and strict regulations threaten profit margins.

Russian banks have reported record annual profits, totaling 4 trillion roubles ($40.7 billion) in 2024, credited to the nation's financial sector recovery from western sanctions.

The central bank's decision to maintain a high key interest rate currently at 21%, significantly boosted the banks' net interest margins.

However, the lending growth exhibited a slowdown, largely due to increased borrowing costs that deter some companies from pursuing financing. Industry leaders like German Gref of Sberbank and Andrey Kostin of VTB have raised concerns about the effects of high interest rates and stricter regulations on profit margins.

(With inputs from agencies.)