Expert RA forecasts 15 banks to exit Russian market, profits to dip

The Russian rating agency Expert RA predicts that this year, 15 banks will exit the Russian market. This exodus is expected to result in the banking sector's overall profits decreasing by approximately 7.7 billion USD. The departure of these banks is attributed to either the voluntary surrender of their licenses or revocation.

According to "Kommersant," the banking sector's profits in 2024 are anticipated to decline from a record high of 50.8 billion USD to 43.1 billion USD. Elvira Nabiullina, the head of Russia's central bank, suggests profits could even plunge to 35.4 billion USD.

This downturn in profits stems from stricter regulations, alterations in the provision of mortgage loan subsidies, and the central bank's potential establishment of loan limits, as reported by Russian media outlets. Consequently, this year's mortgage loan volume might see a reduction of 10-20% from last year's 120 billion USD.

At the year's start, Russia's banking landscape comprised 324 banks and 37 non-bank financial institutions. By February, the central bank took action by revoking banking licenses for the first time in eighteen months.

In this regulatory sweep, Qiwi Bank, an electronic banking entity, was among the first to lose its license, shortly followed by Hephaestus Bank. Both institutions were penalized for violating anti-money laundering regulations among other infractions.

In a discussion with "Kommersant," Ksenia Yakushkina, a director at the bank ratings agency, noted that license revocations would cause half of the affected banks to exit the market. Other exits will occur through license surrenders, planned reorganizations, and mergers and acquisitions (M&A).

Concurrently, the profit share of the top 10 banks within the sector is expected to rise from 72.7% in 2023 to 75% in 2024, with the largest banks amassing profits of 32.3 billion USD, as forecasted by Expert RA. This growth is attributed to reduced financing costs and the technological edge held by the largest banks. However, the profits of medium-sized banks are projected to shrink by nearly 29%.