Russian Banks Grow Too Quickly

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Russian banks have shown record profits of 848 billion roubles ($26.5 billion) in 2011, which is 50% more than the year before, the Bank of Russia announced yesterday.

Too rapid growth may create problems in future.

Though the boost to the bottom line comes largely from the release of loss reserves, the rate of growth in loan portfolio of Russian banks has more than doubled. Corporate lending grew by 26% and retail lending by 36%.

Yet, the largest banks are growing even faster: Sberbank's loan portfolio in retail grew by 36.6% and in the corporate sector by 34.1%; Gazprombank has increased lending to business by 73% and to individuals by 31%.

According to deputy chairman of the Bank of Russia Alexei Simanovsky this rate of growth is ‘a bit alarming’.

In 2011, real disposable income did not grow. In 2012, Russia’s Ministry of Economic Development expects the GDP growth to slow down from 4.2% to 3.7%. This means that the credit boom in 2011 has far outpaced the growth rate of borrowers’ income and that distance between the two is likely to increase.