Russian banks made a record $36.8 billion in profit last year, and even the central bank is surprised by it

• Russian banks made a record 3.3 trillion rubles, or $36.8 billion, in profits last year.
• It was driven by demand for mortgages and loans to finance large business acquisitions.

Even Russia's central bank is surprised by how well Russian banks did last year.

Russian banks made 3.3 trillion rubles, or $36.8 billion, last year, marking a record high, the country's central bank announced on Tuesday.

The performance came as “somewhat of a surprise,” said Alexander Danilov, the head of Russia's central bank's banking regulation department, according to the Financial Times.

The earnings are a massive jump from the sector's 200 billion-ruble profit in 2022 — when profits tanked 90% from a year earlier amid Western sanctions over Russia's invasion of Ukraine.

Russia's banking sector's performance last year was spurred by demand for mortgages as well as loans to finance large business acquisitions, the central bank said in its statement on Tuesday.

Mortgage lending last year rose nearly 35% from a year ago as Russians rushed to buy homes on state-backed subsidized mortgage rates, said the central bank.

Russian authorities have started winding down the discounted mortgage program, the independent Russian news outlet The Bell reported in September. At the time, mortgage rates in Russia were around 15%, but the subsidized mortgage rate was 8%. Families got a bigger discount with a mortgage rate of 6%.

Meanwhile, corporate lending in Russia rose about 20% last year from a year ago, the country's central bank said on Tuesday. It didn't specify what the loans went to, but Russian businesses have been buying up assets from international firms that left the market.

The latest central bank report is another indication of unusual resilience in Russia's sanctions-hit economy nearly two years into its war in Ukraine.

Reports suggest that much of the country's growth is due to massive military and government spending.

However, Russia's economy runs the risk of overheating, the country's top central banker, Elvira Nabiullina, said in December as she hiked benchmark interest rates to 16% to cool demand.

On Tuesday, Russian central bank's Danilov said both consumer and corporate lending growth are expected to slow next year, in turn hitting bank profits, per Reuters.