The Central Bank of Russia (CBR) released results for the banking sector for July that paint a picture of gradual improvement, except in the retail segment where things are still getting worse.

Most importantly, the profit of the sector as a whole has been improving steadily. After Russian banks earned a total of RUB110bn in 2015, the RUB459bn ($7.1bn) they have made in the first seven months is welcome indeed. In July, CBR governor Elvira Nabiullina said the sector could earn a total of RUB500nb this year, but even that estimate is starting to look conservative.

At the same time the amount of money that the CBR has given to the sector in the form of soft loans continues to fall from RUB5,363bn in July 2015 to RUB2,729bn a year later. In percentage terms the CBR support of the sector reached a peak of 15% of assets in 2015, but is now down below 5%.

The growth of the sector is being driven by the improving net interest margin (NIM) spread, the difference between what a bank can borrow at and what it lends at, which has boosted profits this year.

In particular, the profits at Russia’s retail banking behemoth Sberbank tripled in June year-on-year according to its Russian Accounting Standards (RAS) numbers released last week. The bank earned RUB45.6bn ($701mn) in net income in July, which is 1% above the June figure and three times more than the bank earned a year ago (RUB10.9bn), report analysts at Aton.

However, the news was less good in retail banking where non-performing loans (NLPs) continue to grow and have reached their highest level in over two years at 8.6% of total loans, or RUB913bn ($14.1bn) worth of debt that is 90 days or longer overdue.

“Overdue loans expanded 1.6% m/m both in the retail and corporate segments. As a result, the share of overdue amounts was flat m/m in the corporate loan book and up 10bp m/m to 8.6% in retail,” VTB Capital said in a note.

At the same time, retail borrowing remains anemic while corporate loans grew mildly. The sector loan portfolio increased 1.3% m/m (0.2% after adjusting for a 4.3% depreciation of ruble vs dollar) with corporate loans +1.6% and retail +0.4% (or +0.2% and +0.3%, respectively, on an FX-adjusted basis, reports VTB Capital.)

Retail lending is not growing, despite the best efforts of bankers. During January-July, the portfolio of loans to natural persons decreased by 0.6%, the Central Bank said in its review, calling the main reason for the continuing decline in unsecured consumer lending. Sociologists added that the population is still afraid of a fresh devaluation and job insecurity remains high, which has led people to reduce their debt burden. 

Retail accounts grew 1.7% m/m or only 0.6% net of the FX effect, while corporate accounts shrank 0.9% and 2.8%, respectively.