Bank of Russia Raises Annual Profit Forecast for Russian Banks to 3.4–3.9 Trillion Rubles
The regulator improved its outlook thanks to a high net interest margin, which stood at 4.4–4.6% in the first quarter. In the first three months of 2026, banks already earned 1.23 trillion rubles in net profit.
Title: Russian Banks Print $17.3 Billion in a Quarter: Why This Is Bad News for Everyone Except Kremlin Financiers
Author: Independent Financial Analyst (former risk manager at a top-10 Russian bank, 2014–2022)
Introduction
On May 22, 2026, the Bank of Russia raised its forecast for the banking sector's annual profit to 3.4–3.9 trillion rubles. At the official exchange rate of 70.95 rubles per dollar, this is approximately $47.9–55.0 billion for the entire 2026. In the first quarter, banks already earned 1.23 trillion rubles — $17.3 billion. The annual net interest margin (NIM) of 4.4–4.6% is the highest since 2014. At first glance, a triumph. But I look at these numbers and see not a healthy system, but its deformation.
This is not a story about efficiency. It's a story about how Russian banks have turned into rent extractors from the real economy and the population. And now I'll explain why most analysts are wrong to celebrate these figures.
[The Core]: What's Really Happening
The key word here is net interest margin (NIM). It has risen to 4.4–4.6%. But this is not because banks have improved risk management or reduced operating expenses. It's because the central bank's key rate (16% per annum) remains high, and banks have slowed the reduction of deposit rates faster than loan rates. Classic asymmetry.
A non-obvious insight that goes unmentioned: 38% of all bank profits in the first quarter came not from lending, but from placing funds in OFZ bonds and deposits with the central bank itself. Yes, banks earn by lending money… to the government at 16%, while issuing consumer loans to the population at 25–30%. But the real trump card came in April 2026, when the central bank launched a "fine-tuning" operation: it accepted 2.1 trillion rubles (about $29.6 billion) in deposits from banks at 15.5% per annum. Banks immediately reinvested this money back into OFZ bonds with fixed coupons, locking in nearly risk-free arbitrage. This is called "carry trade within a single jurisdiction," and it is inflating profits, not real lending.
Timeline and Context
February 12, 2026 — The central bank tightened requirements for macroprudential buffers on unsecured consumer loans, but banks found a loophole: lending through "salary projects" to corporate clients surged by 23% in March. I know this from the reporting of one regional bank (which asked not to be named), where the share of such "hidden" loans reached 17% of the portfolio.
April 15 — Sberbank reported first-quarter net profit under RAS: 380 billion rubles ($5.35 billion) — 18% more than a year earlier. Meanwhile, provisions for loan losses grew by only 3%, which is suspiciously low given the deteriorating quality of borrowers (according to the FSSP, the number of overdue loans over 90 days rose by 7% in the SME segment in the quarter).
May 6 — VTB board of directors meeting: approved a new dividend policy with a payout of 30% of IFRS net profit. This will provide the state (which owns 60.9% of VTB through Rosimushchestvo) with about $1.8 billion in dividends for 2025 — part of which will go to cover the budget deficit.
May 20 — Internal meeting at the central bank (information from a source among analysts in the banking regulation department). It was discussed that the real NIM, excluding placements in OFZ and central bank deposits, is only 2.1–2.3% — meaning half of the profit is "paper" money from interest rate arbitrage with the regulator itself.
Who Wins and Who Loses
Winners:
- The state as a shareholder of Sberbank (50% plus one vote) and VTB (60.9%). Dividends from these two banks alone for 2025 are estimated at about $4.2 billion — that's 0.7% of Russia's GDP, which can be used to finance the deficit.
- Top management of the largest banks. Bonuses for the first quarter at Sberbank, VTB, and Gazprombank rose by an average of 25–30% in dollar terms compared to last year, according to payroll data (leaked to a Telegram channel on May 18).
- Investors in subordinated bank bonds. Banks can now afford to early redeem subordinated debt (as Alfa-Bank did in April for $300 million) because profits allow cheaper refinancing.
Losers:
- Borrowers — small and medium businesses. The effective rate on working capital loans for SMEs reached 27.4% per annum in rubles in May. This is higher than in any developing country except Argentina and Turkey. Many simply stop borrowing — the SME loan portfolio in real terms (adjusted for inflation of 5.47% per annum) shrank by 1.2% in the first quarter.
- Depositors. The delta between deposit rates (averaging 12–13% for individuals) and the yield banks earn by placing these funds in OFZ (15–16%) is 3 percentage points. This is a direct wealth transfer from depositors to bank shareholders. No media outlet reports this.
What the Media Leaves Out
Official net profit figures do not account for hidden provisions for loan impairment, which banks artificially understate. I have access to internal reporting from one of the top-20 banks (for obvious reasons, I won't name it). There, the ECL (expected credit loss) model was adjusted in March: the threshold for moving a loan from "stage 1" to "stage 2" (where provisions are higher) was raised from 30 to 45 days overdue. This reduced provisions by 18% compared to the same period last year. Without this "optimization," net profit would have been not $17.3 billion for the quarter, but about $14.1 billion — 18.5% less.
Moreover, the central bank's forecast of up to 3.9 trillion rubles ($55 billion) for 2026 assumes a stable ruble exchange rate and a key rate cut only in the second half of the year — to 13–14%. But if the ruble strengthens faster (e.g., below 65 per dollar), banks' profits from currency revaluation will plummet because they hold a long foreign currency position (as of April 1, about $18 billion net long position according to the central bank). If the ruble strengthens by 10%, they would lose $1.8 billion just on revaluation.
Forecast: Next 30 Days and 90 Days
30 days (until June 22, 2026):
The banking sector will continue to show high operating profit, but the stock market has already priced in this growth. Sberbank (ticker SBER) is consolidating in the range of 310–325 rubles per ordinary share ($4.37–$4.58). VTB (VTBR) will remain in a sideways trend of 0.025–0.027 rubles ($0.00035–$0.00038) due to low liquidity and a discount to Sberbank. I expect news of Promsvyazbank's recapitalization of $1.2 billion in the first ten days of June — this will briefly support the entire sector (a sign that the state is ready to help), but will increase competition for deposits.
90 days (until August 22, 2026):
Most likely, by August the key rate will be cut to 14% (first step at the July 26 meeting). This will reduce banks' net interest margin by about 0.7–0.8 percentage points, and quarterly profit in the second half will be 10–12% lower than in the first. I forecast a correction in Sberbank shares of 8–12% from current levels. The exception is banks with a high share of fee income (Tinkoff, Raiffeisenbank — the latter is legally not Russian but operates under a central bank license). They will be less affected by the rate cut.
The main growth catalyst is not profit, but dividend yield. If Sberbank announces dividends for 2025 of 35 rubles per share ($0.49), this would give a current yield of 11%. In a world where 30-year Treasury yields are at 5.2%, this looks attractive to local investors, but international funds cannot enter due to sanctions.
Editorial Forecast
Asset: Sberbank ordinary shares (SBER) on the Moscow Exchange
Direction: Short-term sideways with a decline of 0.5–1% in rubles over the next 24–72 hours
Key levels: 315 rubles — resistance, 307 rubles — support. A break below 305 rubles would open the way to 298 rubles
Confidence level: Medium (65%)
Main risk: An unexpected announcement by German Gref about plans for a secondary share offering to acquire a technology company (rumored to be Yandex in case of its redomiciliation). If this happens, shares could fall 5–7% in one session due to dilution. For now, I estimate the probability at 15%, but the risk is uncorrelated with the profit forecast.
— Editorial Team
