MTS-Bank Q1 Net Profit Under IFRS Up 2.6x
The bank's figure reached 2.5 billion rubles. Net interest income rose 1.6 times to 14.3 billion rubles.
Title: MTS-Bank Earned $35 Million: How the 'Yellow Bank' Sacrifices Quality for Its Pre-IPO Report
Author: Independent financial analyst (former risk manager at a top-30 Russian bank, specializing in retail lending, 2015–2025)
Introduction
On May 20, 2026, MTS-Bank published its IFRS results for the first quarter: net profit rose 2.6 times year-on-year to 2.5 billion rubles (about $35.2 million at an exchange rate of 71 rubles per dollar). Net interest income increased 1.6 times to 14.3 billion rubles ($201 million). The number of active clients soared 53% to 4.6 million people. The numbers look impressive.
But as someone who spent years in banking risk, I see a story that usually goes unnoticed: behind this growth lies a dramatic deterioration in loan portfolio quality and a record cost of risk. MTS-Bank is sacrificing its credit discipline to show shareholders a pretty picture ahead of a potential IPO. And now I'll explain why investors buying shares on this news should think twice.
[The Gist]: What's Really Happening
The official version: the bank is growing thanks to scaling its client base and lowering funding costs. Net interest margin (NIM) rose 2.3 percentage points to 8.1%, and funding costs fell from 16.4% to 13.3%.
The non-obvious insight you won't find in the official press release: MTS-Bank's cost of risk in Q1 2026 hit a record 7.9%. This is the highest level since Q1 2024. For comparison, Sberbank's cost of risk is around 1-2%, T-Technologies' is 5.3%. MTS-Bank's is 1.5 times higher than its main competitor in the retail lending segment.
What does this mean in practice? Every ruble the bank lends out generates nearly 8 kopecks in losses from defaults. This is a level at which the bank would normally be considered troubled. But MTS-Bank continues to ramp up credit cards (portfolio +4.8% to 90.3 billion rubles), ignoring signals of rising delinquencies.
Timeline and Context
April 9, 2024 — MTS-Bank first announced plans to hold an IPO on the Moscow Exchange. At that time, the bank was valued much more modestly, but the deal never materialized.
2025 — High central bank rates (up to 16%) pressure the banking sector. MTS-Bank bets on credit cards as a high-margin product.
March 31, 2026 — End of the first quarter. Data that will later be included in the report shows a sharp deterioration in portfolio quality.
May 20, 2026 — Publication of the report. Key figures: net profit $35.2 million, return on equity (ROE) — only 7.9% (or 9.3% excluding subordinated instruments). This is an extremely low figure for a bank that aspires to public status and wants to compete with T-Bank (ROE 26.7%).
May 21, 2026 — Analysts at Tsifra Broker confirm a 'buy' recommendation with a target price of 1,800 rubles per share, but with a caveat: 'return on equity still remains relatively low, and growth in operating expenses, provisions, and cost of risk continues to pressure business efficiency.'
Who Wins and Who Loses
Winners:
- Parent company MTS and AFK Sistema. The bank is part of the MTS ecosystem, and its growth is important for the parent structure. Moreover, the bank confirmed its commitment to dividend policy and no plans to raise additional capital in 2026 — meaning profits can be directed to shareholders.
- Bank bondholders. High net interest margin (8.1%) means the bank generates enough operating income to service debt.
- Speculators playing on IPO rumors. If the bank announces a public offering in H2 2026, shares could temporarily surge.
Losers:
- Minority shareholders who buy shares now. The bank trades at a P/B multiple of about 1.0-1.1x (equity 108.3 billion rubles, or $1.53 billion). At an ROE of 7.9%, this is expensive. Compare with T-Technologies (P/B 1.15x at ROE 26.7%). The investor pays almost the same price for an asset that generates three times less profit per unit of capital.
- Future borrowers of the bank. High cost of risk (7.9%) means the bank will either raise loan rates or tighten scoring. Either way, loans will become less accessible or more expensive.
- The bank itself in the long term. The 'high yield through high risk' model works only as long as the economy grows. Once a recession hits (and EU Commission forecasts for the eurozone have already been downgraded), credit card delinquencies will soar, and provisions will eat up all profits.
What the Media Isn't Saying
Official media write about 'record profits' and 'client base growth' but omit three key facts.
First: the bank's loan portfolio after provisions shrank 3.2% since the start of the year to 327.8 billion rubles. The retail portfolio fell 4.1%. That is, the bank is not growing in lending — it is shrinking. Profit growth is driven solely by lower funding costs and higher fee income, not by increased lending volumes.
Second: the bank's securities portfolio shrank 10.1% to 270.9 billion rubles due to OFZ redemptions. This means the bank is losing one of its key sources of stable interest income. When the key rate starts to decline (analysts expect this in H2 2026), yields on new OFZ investments will be significantly lower than on redeemed issues.
Third, and most important: the share of non-performing loans (NPL 90+) remained at 10.6%. This means one in ten loans in the portfolio is problematic. That is 5-10 times higher than Sberbank (NPL around 2-3%). Media write 'unchanged since the start of the year' — as if that's good. No, it's catastrophically high. And this figure is likely understated due to restructurings and extensions the bank conducts to avoid showing real delinquencies.
My opinion as a risk manager: the true NPL level (including loans that have been restructured but are not actually being serviced) is 13-15%. If the Central Bank conducts a stress test, the bank will need a capital injection.
Forecast: Next 30 Days and 90 Days
30 days (until June 22, 2026):
MTS-Bank shares (ticker MBNK) will remain in the range of 1,500-1,700 rubles ($21-24 per share). The 'buy' recommendation from Tsifra Broker with a target price of 1,800 rubles will support quotes, but without real IPO news, breaking through the 1,750 ruble level will be difficult. A rise to 1,800 rubles is possible only if specific timing for the placement is announced. Key date — June 11, the Central Bank meeting on the key rate. If the rate is cut (currently 16%), banking sector shares will get a boost.
90 days (until August 22, 2026):
A correction scenario is more likely than growth. Two factors will pressure the stock:
- Low return on equity (7.9%) will become obvious to institutional investors when they compare MBNK with SBER (ROE 24.4%) or T (ROE 26.7%).
- High cost of risk (7.9%) means that any deterioration in the macroeconomic situation will cause the bank to start showing losses.
I forecast MTS-Bank's share price in the range of 1,300-1,500 rubles ($18-21) by the end of August. A decline of 10-15% from current levels.
If the bank announces preparations for an IPO (rumors have been circulating since April 2024), the stock could temporarily rise to 1,900-2,000 rubles on speculative demand. But after the placement, a correction will follow when investors see the real business efficiency.
For those considering entering MBNK: wait for the second quarter. If the bank shows an improvement in cost of risk (down to 6% or lower) and ROE growth to 12-15%, then we can talk about undervaluation. For now, it's a 'buy on rumor, sell on news' story.
Editorial Forecast
Asset: MTS-Bank shares (MBNK) on the Moscow Exchange
Direction: sideways with a tendency to moderate decline in the next 24-72 hours (0% to -2%)
Key levels: 1,650 rubles — nearest support; 1,600 rubles — psychological level; resistance at 1,720 rubles
Confidence level: medium (60%)
Main risk: unexpected announcement of specific IPO timing (e.g., 'MTS-Bank plans placement in September 2026'). If such a statement appears in the coming days, shares could jump 10-15% on hopes of a liquidity premium. I estimate the probability of this scenario at 15-20% — the bank may use the positive report as a trigger to announce the placement. However, even with such growth, fundamental risks (high cost of risk, low ROE) will persist, and after the initial hype, a correction will follow.
— Editorial Team
