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The outgoing year is set to become the best in history for Russian banks, which saw their profits soar despite Western sanctions on the economy, the Vedomosti news outlet reported on Tuesday, citing central bank data.

According to the report, the cumulative profit of the country’s banking sector has exceeded 3 trillion rubles ($32.7 billion) in the 11 months so far of 2023. By the end of the year, banks are expected to fetch 3.3 trillion rubles, a record high.

All key banking operation areas have been growing rapidly: Lenders’ corporate loan portfolio surged by more than 20% in January-November, mortgages by 30.3%, and consumer loans by 16%. In addition, company deposits grew by 15.3% and household deposits by 20.4%. In comparison, in 2021, the “reference” year for the sector, mortgages and corporate portfolios grew slower: By 26.4% and 14.8%, respectively, while household deposits increased by a mere 5.7%.

Experts note that banks’ profits have been growing amid the overall recovery of the country’s economy after the sharp decline it suffered due to Ukraine-related Western sanctions last year. Relatively low interest rates in the first half of the year (for instance, 7.5% in mid-summer) also contributed to the trend.

Despite the regulator’s more recent turn toward tighter monetary policy, which brought the key rate to 16% earlier this month, experts note that the banking sector’s net interest margin remained high at 4.8%. This was achieved by reducing funding costs compared to 2022, when banks sharply raised deposit rates to 20%.

A significant contribution to profits also came from currency revaluation, with foreign currency assets and liabilities on banks’ balance sheets in ruble terms rising against last year’s figures. Meanwhile, most experts warn that next year’s results will likely be less stellar as high interest rates will weigh on banks’ profits.

For more stories on economy & finance visit RT’s business section

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