Profit Slumps Herald More Trouble Ahead for Russia’s Corporate Giants

Russia’s blue chip companies have posted some of the bleakest financial results for years in the first few months of 2020, with analysts saying the hit to earnings will only grow sharper. Energy giants, banks and airlines all saw their earnings slump over the first three months of the year, and the damage could last well beyond the coronavirus as economists don’t expect economic activity in Russia to rebound anytime soon. Just over half of Russia’s largest corporates have already published financial results for the first quarter — covering the period of peak financial volatility in mid-March but only the first few weeks of the coronavirus economic slowdown in Europe and Russia. The figures represent what could be the tip of the iceberg in terms of plunging earnings. State-owned lender Sberbank — Russia’s largest bank — has already seen profits atrophy, down 47% in the first three months of the year in official results. Another trading update gave a sign of how bad the earnings picture could get for Russian companies once the period of Russia’s “non-working” weeks, introduced at the end of March, is included — profits were down 85% in April compared to last year.

With most companies only posting results for the first three months of the year, the biggest immediate hit from the coronavirus has not yet been reflected in results. Regardless, Russian banks are bracing for a much longer hit to earnings than just one or two quarters. Sberbank has increased its provisions for losses on its loan book eight-fold in response to rising unemployment and falling earnings. Rival VTB — also state-owned — saw profits down 14% in the first quarter as it also increased loss provisions and marked down the value of its investments. Oil goliath Rosneft posted its first quarterly loss in eight years, hemorrhaging $2.2 billion during the first three months of the year. For most of Russia’s largest companies, the true hit of the coronavirus has not yet been reflected in the results reported so far. There are concerns that muted levels of government support for households and businesses could mean a slow recovery. Surveys show that up to 60% of Russian businesses say government support is either completely useless or just postponing their problems.

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Rogue Valley said:

Profit Slumps Herald More Trouble Ahead for Russia’s Corporate Giants

Russian companies’ first quarter financial results are already showing the impact of the coronavirus. The worst is yet to come.

Putin and Rosneft CEO Igor Sechin.



With Western investment/banking dollars out of reach due to sanctions over Crimea and Donbas, Russia's economic recovery will lag behind that of most Western nations.

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