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Owner of Russia's Tinkoff bank sees 2022 net profit drop 67%

FILE PHOTO: St. Petersburg International Economic Forum (SPIEF)

By Alexander Marrow

(Reuters) -TCS Group Holding, owner of Russian online lender Tinkoff, on Wednesday reported a 67% drop in 2022 net profit to 20.8 billion roubles ($274 million), as sweeping Western sanctions hit Russia's financial sector.

Russia's banks struggled last year, with the sector's profits slumping around 90% as many major lenders were disconnected from the SWIFT global payments network. Tinkoff's above average performance partly reflects that it was not hit by European Union sanctions until late last month.

TCS said the profit drop "was driven by the escalating geopolitical tension in the region that affected the economic and operating environment of the group and led to an increase in credit risks, volatility in financial markets and wind-down of lending during (the) first and second quarters of 2022."

The group had reported record profits of 63.4 billion roubles in 2021.

In the days after Moscow despatched troops to Ukraine last year, Russia's central bank told Russian banks they should not publish certain financial statements, seeking to limit risks to credit agencies associated with the imposition of Western sanctions.

But the regulator now wants banks to gradually resume disclosures. Dominant lender Sberbank resumed reporting to international accounting standards last week, expecting profits to rebound sharply this year after a nearly 80% drop in 2022.

As financial stability risks swirled, brought about by a volatile rouble, sharp interest rate swings, sanctions pressure and general uncertainty, TCS underwent changes. Founder Oleg Tinkov sold his stake in April. A few weeks earlier, the group ring-fenced its Russian business.

TCS also said it was extending a temporary suspension of dividend payments - introduced in November 2021 - "until further notice", and refrained from providing guidance on its expected 2023 earnings "until more clarity appears with respect to the overall operating environment."

The bank's non-performing loans (NPL) ratio increased to 12.1% as of Dec. 31 from 8.6% at the end of 2021, TCS said, while the NPL coverage ratio increased to 141.5% from 131.9%.

Net interest income grew by 8.6% to 143.9 billion roubles, below 2021's 26.6% increase, which the bank said was due to the central bank's emergency rate hike to 20% in the first half of 2022.

TCS' Moscow-listed depositary receipts were down 1.8% at 1553 GMT, underperforming the wider market. Trading in its London-listed global depositary receipts was suspended in early March 2022.

($1 = 75.7730 roubles)

(Reporting by Alexander Marrow, Jake Cordell and Elena Fabrichnaya; Editing by Kevin Liffey, Elaine Hardcastle and Mark Potter)