Russian Banks' core business buck market trends

Banks in Russia reported an increase of its 9M 2011 IFRS net result this week
Unrest in European financial markets cut the net results of Russian banks in 3Q 2011. However, domestic players point to better market conditions in Russia, as both loans and deposits go up, providing for growth in the bottom line during 9M 2011.

Among Russian banks reporting this week were a country’s largest Sberbank, Nomos Bank and Bank St. Petersburg. All of them posted a year on year increase in net profits, saying revenues from their core operations were the main drivers.

Reporting on Friday, Bank St. Petersburg, which is the second tier of Russian banks, said it boosted net profit 145% year on year in January – September 2011 to 5.6 billion roubles, while the 3Q bottom line went down 2.6% year on year to to 1.1 billion roubles, which is in fact a bigger drop in quarter on quarter terms, down 52.5% from the 2Q 2011 figure.

Turbulence in stock markets in 3Q drove the bank’s net result into the red, loosing 90.6 million roubles. “In spite of this the Bank’s earnings from core business are growing as well as customer deposits. Our operational efficiency is still high and key ratios remain within the target range,” said Chairman Alexander Savelyev.

Nomos Bank demonstrated similar dynamics, posting a net profit of 6.9 billion roubles in 9M 2011, and a 3Q 2011 bottom line going down 74% quarter on quarter, to 768 million roubles. And again the net result from trading on securities was negative in 3Q 2011 – a loss of 2.9 billion roubles. That “included mostly negative revaluation of fixed income securities portfolio due to financial market volatility,” the Bank said in the statement.

These losses were well covered by the gains from core operations, as “consumer loans rose in 2011, as well as small businesses loans: up 43.1% and 39.8% accordingly,” explained Nikita Ignatenko from Investcafe.

The banks reported under IFRS.