24 Jun 2024 12:13

Sovcombank might lower 2024 profit guidance due to CBR's high key rate

ST. PETERSBURG. June 24 (Interfax) - Sovcombank might again lower its profit guidance for 2024 due to the revision of expectations for the Central Bank of Russia's (CBR) key interest rate, the Russian lender's first deputy CEO, Sergei Khotimsky said.

"Going into the IPO, we gave a forecast for 2024 and factored a rate reduction to 12% before the end of 2024 into the budget. We always stressed that the high rate has a moderately negative impact on the bank. Then we recalculated based on a forecast of 16% [for the CBR rate] and revised the forecast. Given that now the baseline forecast is already 18%, you understand that there will be another revision," Khotimsky said at the Smart-Lab conference.

He said the second quarter has been difficult. "On one hand, loan portfolios are growing fast, both retail and corporate. This is good. At the same time, this growth has to be financed with increasingly more expensive liabilities. For retail this is bad. Furthermore, the securities portfolio is showing negative results due to rising rates," Khotimsky said.

"Despite the possible slowdown in profit now, we are confidently looking ahead, because a decrease in rates is inevitable in future, and the more we manage to lend at high rates, the more lucrative this will be in the end," Khotimsky said.

Sovcombank closed 2023 with an IFRS net profit of 95 billion rubles compared to a loss of 14.3 billion rubles in 2022.

The bank revised its 2024 profit guidance in May and no longer expects this figure to reach last year's level, primarily due to the revision of the forecast for the key rate, which it projected would remain at 16% until the end of the year instead of being lowered in the second half of 2024 as previously expected.

Sovcombank considered several scenarios for 2025, most of which project possible record results thanks to the completion of the integration of HCF Bank and steady growth in the corporate segment, the bank said in May.