Russia's state-owned Sberbank announced a first-quarter net profit of $4.32 billion, an 11.3% increase over the same period last year, Reuters reported on April 26.
Despite being under Western sanctions, Russia's banking industry is once again thriving. Sberbank reported a record annual profit of $16.3 billion in 2023, a more than five-fold increase in 2022.
"We are observing strong growth for the start of the year in retail clients' funds, which forms a solid base for the development of the business in the future," CEO German Gref said in a statement reported by Reuters.
The bank announced on April 23 that it would pay out a dividend of $8.04 billion. Being majority-owned by the Russian state, this money can be used to fund the full-scale invasion of Ukraine.
In the immediate aftermath of Russia's full-scale invasion of Ukraine in 2022, Russia's banks – increasingly isolated from the global economy and laden with heavy Western sanctions – saw profits fall by 90% compared to 2021.
But the pain was short-lived, and just a year later, Russia’s Central Bank announced the country’s banks had achieved record profits last year, raking in some $36.8 billion.
In an effort to overcome Western sanctions, the Kremlin implemented a number of economic measures, one of which was subsidized mortgages, which were taken up by Russians in huge numbers.
In 2023, mortgage lending rose by nearly 35%, according to data from Russia’s Central Bank, with 83.4% of those mortgages being subsidized.
The huge increase in mortgage repayments has reinvigorated Russia's banks while the government has had to pay banks more and more money to make up the shortfall between their "preferential rate" and the actual rate.
But even Russian officials admit that this kind of expenditure is not sustainable in the long run and is already pushing inflation levels up.
At the end of last year, Russia’s inflation stood at7.4 percent, compared to 3.7 percent in Germany and 3.4 percent in the United States.
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