The golden era of foreign exchange profits has ended: banks’ revenues have decreased by 2 billion KGS

Financial reports of Kyrgyzstan’s banks for January–July show a downward trend in profits from foreign exchange operations. These profits have fallen by more than 2 billion KGS, amounting to 17.9 billion KGS. What was considered a reliable source of income just a year or two ago is no longer a guarantee of banks’ financial well-being today.

Since 2022, following the outbreak of the conflict between Russia and Ukraine, the regional foreign exchange market has turned into a storm. Western sanctions triggered sharp fluctuations in the ruble exchange rate, and Kyrgyz banks began earning billions from currency exchange operations. Amid uncertainty, exchange rate gains became the key driver of record profits for many of them.

In 2024, Mbank emerged as the absolute leader, earning over 5.5 billion KGS from foreign currency operations. However, this year it has become one of the financial institutions whose foreign exchange income dropped the most. Its revenues in this category declined by more than 2.5 billion KGS, or 1.8 times.

Following Mbank, other institutions that ended up in the red include Aiyl Bank (–558.6 million KGS) and Eldik Bank (–188.4 million KGS). Losses were also recorded by Kyrgyzkommertsbank (–162.8 million), Bakai Bank (–135.9 million), Bank of Asia (–85.2 million), among others.

The decline in foreign exchange income is partly due to the gradual stabilization of currency markets, with fewer sharp fluctuations as the market adapts to global geopolitical tensions.

Another key factor was the regulator’s stricter oversight and the government’s decision to transfer all ruble operations to the state-owned Capital Bank, which since April has acted as the settlement bank for transfers to Russia. Through this bank, large transactions exceeding 3 million rubles per client per month, as well as corporate deals in addition to personal remittances, began to be processed.

For Capital Bank, this has become a source of stable foreign exchange income, as ruble exchange operations, according to statistics, accounted for the lion’s share of banks’ FX profits. For context, in the second quarter of this year, a total equivalent of 82 billion KGS was transferred to the country in various currencies, of which more than 80% — or 64.3 billion rubles (+59.6%) — were in rubles.

At the same time, all Kyrgyz banks that were able to operate with the Russian ruble have now come under sanctions. In January of this year, the United States imposed sanctions on Keremet Bank, and on August 20, the United Kingdom added Capital Bank to its sanctions list.

Even before coming under sanctions, between April and July, Capital Bank managed to profit from the government’s decision. It ranked among the top three banks in terms of growth in foreign exchange income, posting a gain of +211.4 million KGS. However, the leaders of the ranking were Optima Bank, whose foreign exchange earnings increased by nearly 700 million KGS, and Eurasian Savings Bank, with an increase of 337.5 million KGS.