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Russia’s banking sector showed record financial results in 2024, with profits reaching 4 trillion rubles (USD 40.7 billion), the Central Bank of the Russian Federation reported. Despite the sanctions and economic pressure, high interest rates (21%) and active lending ensured record revenue growth, Reuters reports.
However, experts warn that in 2025, banks’ profits could decline significantly due to rising loan default risks and tighter regulatory requirements.
Are high rates a support or a threat?
The heads of Russia’s largest banks are already expressing concern. German Gref, head of Sberbank, called the current level of rates a “colossal challenge”, while Andrey Kostin, head of VTB, stressed that tighter market rules would hit profits.
The Central Bank confirms that the growth in lending to businesses and households has slowed, especially in the mortgage market. While in 2023 it grew by 34.5%, in 2024 it grew by only 12.4%, and the total amount of mortgage loans issued decreased by 40%.
Credit risk is rising: can the economy withstand it?
Government analysts warn of a possible wave of corporate bankruptcies in 2024-2025. The share of companies with a risky debt burden has doubled, which could trigger problems with loan repayment.
Some industries have already felt the negative impact. For example, mobile operator MTS reported an 88.8% drop in net profit in the third quarter due to high debt service costs. Russian railways also faced additional costs of $4 billion due to rising interest rates.
Despite the difficulties, the Central Bank of the Russian Federation believes that most companies are still profitable and can withstand the current level of rates. However, experts note that further growth in non-performing loans and low investment activity could reverse this trend as early as 2025.
