Profits in Russia’s banking sector rose to 70 billion roubles ($975 million) in June from just 500 million roubles in May, which included some weeks of lockdown due to the coronavirus pandemic, the central bank said in a report on Friday.

Despite the recovery, the central bank said the June figure was much lower than the average monthly profit in 2019, which stood at around 140 billion roubles.

Three benchmark interest rate cuts by the central bank this year and declining household incomes linked to the economic fallout from the coronavirus pandemic have put banking sector funding under pressure.

The report said bank retail deposits increased 1.9% in June, compensating for seasonal outflows from January to May and people stockpiling cash when restrictive health measures were introduced to curb the spread of the novel coronavirus in March.

This increase was driven primarily by a family support programme that saw the government hand out around 290 billion roubles to citizens, it said, with Russia’s largest lender Sberbank attributing 3% growth to such payments.

In the first six months of 2020, deposits grew 1.2%, while Russian banks made a profit of 630 billion roubles ($8.1 billion).

However, as the central bank noted in a recent review of baking sector liquidity, long-term rouble deposits - an important source of bank funding - fell for the first time since early 2018, with short-term deposits up to 30 days driving the growth.

Chief analyst at Sberbank Mikhail Matovnikov said customer behaviour had changed during the pandemic, with people trying to avoid visiting banks and therefore opening accounts less often, adding that consumption had decreased more than income, allowing people to accumulate savings.

“We find ourselves in a state of crisis, and this has to affect the deposit base,” said the CEO of Moscow-based management consultancy firm Frank RG, Yuri Gribanov.

“The state of market stagnation could last from six months to a year.”

Russia’s central bank will consider cutting interest rates next week, but it has already used much of its room to ease policy and foresees limits to what it can do in the future, Deputy Governor Alexei Zabotkin told Reuters. The central bank slashed its key rate by 100 basis points, the biggest cut in five years, to a record low of 4.5% at its last meeting. It was the third reduction this year as it copes with a contracting economy and low inflation.

Although the bank sees a “significant risk” inflation will remain below its 4% target next year, Zabotkin said further policy easing is likely to be more gradual. The key rate was at 6.25% at the start of this year.

“Most likely the pace of further cuts will be more gradual given that a significant part of the room for easing has already been used,” he said. The central bank’s board is due to meet on July 24 for its next key rate setting decision.

With the Russian economy forecast to shrink by as much as 6% this year, the government plans to spend nearly 4 trillion roubles ($56 billion) to fight the economic fallout from coronavirus.

The need for additional funds forced the finance ministry to temporary soften its fiscal rule to increase spending, the bulk of which will be secured via printing fresh state rouble OFZ bonds.

The central bank, which in the past was at odds with the finance ministry over the pace of budget spending and the potential impact on its inflation goals, has praised the ministry’s efforts. “This year, the budget policy comes in form of stimulus which substantially supports demand and curbs existing disinflation trends,” Zabotkin said.

The central bank saw no threat from the finance ministry’s plans to increase state debt, he said, but added it was important to return to the fiscal rule - and the spending ceilings therein - after the crisis is over in 2021-2022.

Meanwhile, a human-like robot designed to look and act like a female clerk has started providing services to the public at a government office in Siberia.

The humanoid, with long blond hair and brown eyes, is serving customers in Perm, a city 1,100 km (680 miles) east of Moscow.

So far it only helps with issuing certificates to testify that people have a clean criminal record and no record of drug use, documents required in Russia to complete various legal transactions. The robot has been designed to look like an average Russian woman, the company behind the project Promobot said. Its facial features were generated by artificial intelligence based on analysing the appearance of several thousand females.

Reuters