Russias VAT hike will knock $3.4 billion off banks profit in 2026, Sberbank CEO says

The Russian government’s proposal to raise value added tax and eliminate some tax breaks in 2026 to balance the budget would reduce bank profits by up to 9%, Sberbank CEO German Gref said on Wednesday. In the draft budget being considered in parliament, it is proposed to increase VAT by two percentage points next year. This measure is expected to increase inflation as companies shift the burden to consumers. “Next year these financial innovations will result in minus 277 billion rubles,” Gref said. The central bank projects banking sector profits to rise from 3.2 trillion rubles to 3.8 trillion next year. Sberbank’s Chief Financial Officer Taras Skvortsov later explained that the removal of tax deductions for some banking services, such as card services or commercial payment processing services, would also affect profits. Russian banks have been making record profits in recent years, partly due to an overheated economy to sustain what Russia calls a “special military operation” in Ukraine.

Record profits triggered public criticism that banks engaged in wartime excessive profiteering at the expense of industrial sectors, including military enterprises. Economic growth is expected to slow sharply this year after the central bank raised interest rates to 21% a year ago to cool the economy and combat inflation. The slowdown also reduces bank profits.

“This year the banking sector will not be able to make last year’s profit, if at all,” Gref told reporters at a financial conference in the Black Sea resort city of Sochi. Skvortsov said he expects Russia’s largest lender, Sberbank, to report an increase of 6% to 7% despite the expected decline in banks’ 2025 profits.

Sberbank pays half of its profits to the state as dividends. The dividend payment planned for 2026 accounts for approximately 1% of the state budget’s revenues.

This article was generated from an automated news agency feed without modifications to the text.