Due to the severe financial western sanctions on Russia over its invasion of Ukraine, Russian families withdrew $9.8 billion in foreign currency from their accounts in March, while banks slashed new corporate lending by approximately one-third, according to the coutnry’s central bank.

“The quarter was difficult, to put it bluntly. It was very worrying at certain moments, but most importantly, the situation managed to stabilise,” said Alexander Danilov, director of the central bank’s banking regulation and analytics department.

“The banking sector faced significant outflow of the population’s funds … at the end of February,” he said. “People took money out of their accounts in a panic, fearing for their safety.”

The bank said in a monthly report on the evolution of the Russian banking system that deposits declined by 1.2 trillion roubles ($14.72 billion) in February, and the trend continued in March, with outflows of 236 billion roubles.

The central bank did not publish banking sector earnings, unlike previous reports in this series.

Russian banks achieved a record 2.4 trillion rouble profit last year thanks to an economic bounce that restored loan growth and spurred interest in real estate assets, but the ramifications of Russia’s activities in Ukraine have rendered a repetition doubtful.

Consumer lending fell by 1.9 per cent in March, the bank said, as the banking sector was hit by the central bank’s emergency rate hike, rising prices squeezed consumers’ disposable incomes, and uncertainty about job prospects spread.

As the first wave of sanctions landed on Feb. 28, the central bank more than quadrupled its benchmark interest rate to 20 per cent, before lowering it to 17 per cent on April 8. The next board meeting, on April 29, is expected to cut it even more.

In March, the number of mortgage loans climbed by 2.1 per cent to roughly 300 billion roubles, which the central bank attributed to a state-run mortgage programme.

However, it predicted that mortgage loan growth would slow to 10% -15% in 2022, down from more than 30% in 2021.

(Adapted from Reditt.com)

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