Russia's banking sector has faced a significant outflow of its population's funds in foreign currency as the conflict in Ukraine continues to create a fear of insecurity.

A repeat in Russia's economic rebound from last year is unlikely given the consequences of Moscow's actions in Ukraine.
A repeat in Russia's economic rebound from last year is unlikely given the consequences of Moscow's actions in Ukraine. (Reuters Archive)

Russian households have withdrawn foreign currency worth $9.8 billion from their accounts in March and banks cut new corporate lending by around one third, as western sanctions over events in Ukraine worried consumers.

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

"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."

Funds held in deposits fell by $14.72 billion (1.2 trillion roubles) in February, the bank said in a monthly report on the development of the Russian banking sector, and the decline continued in March, with outflows of $2.89 billion (236 billion roubles).

In contrast to previous reports in this series, the central bank did not disclose banking sector profits.

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Economic fallout

An economic rebound that revived loans growth and boosted interest in real estate assets saw Russian banks make a record $29.43 billion (2.4 trillion roubles) of profit last year, but the consequences of Russia's actions in Ukraine have made any repeat unlikely.

Consumer lending fell by 1.9 percent in March as the banking sector took a hit from an emergency rate hike by the central bank, rising prices squeezed consumers' disposable incomes and uncertainty about employment prospects spread, the bank said.

The central bank more than doubled its key interest rate to 20 percent on February 28 as the first wave of sanctions hit, before trimming it to 17 percent on April 8. It is expected to lower it further at the next board meeting on April 29.

Mortgage loans volume increased by 2.1 percent in March to around $3.68 billion (300 billion roubles), which the central bank put down to a state-run mortgage programme.

But it said it expects mortgage loan growth to slow to 10-15 percent in 2022, from more than 30 percent in 2021.

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