Page 61 - bne IntelliNews Country Report: Russia Dec17

Retail lending has come back to life this year and expanded a robust 9.9% y/y in October , which has given economists some cause for optimism. They speculate that consumption is slowly returning as an economic driver. So far this year’s increased retail spending, such as it is, has been largely fuelled by consumer credits as real disposable incomes are flat and retail turnover growth is still hovering just above zero.
Consumer sentiment has turned the corner and is starting to improve, according to the latest Sberbank Ivanov consumer index, which measures the mood amongst Russia’s middle class. They are going upmarket when shopping for food, spending more on holidays and entertainment and starting to spend on big-ticket items as the eight-month growth in car sales show.
Even so consumption remains in the dumpster irrespective of the improvements, as the latest Watcom Shopping index shows with its worst result since the index was started in 2014. The Watcom Shopping index is a lead indicator as it measures the footfall traffic in Moscow’s leading malls, by far the largest and richest retail market in Russia.
Russians' borrowing from banks has doubled since 2009, a poll run by the state owned pollster, the Russian Public Opinion Research Centre (VTsIOM) found. More than half (57%) of the respondents said that either they or their family members have at least one outstanding loan, compared with just a quarter (26%) in 2009. In urgent need for cash, two thirds (64%) borrow from family and close friends, up from 54% in 2014, and 35% take a bank loan, compared with 32% in 2014. The proportion of Russians who have at least once taken out a bank loan has increased from 58% to 67% over the last three years. Meanwhile, 72% of those who have outstanding loans said they don't envisage any problems paying them back, while 22% are worried they may fail to observe their obligations before the lender, and 4% said they definitely won't be able to pay back their loans. A recent study by Sberbank CIS shows that Russians have recently been saving less, ready to make large purchases, while the proportion of those who are saving on dining out, entertainment, vacations and utility bills has hit the minimum mark. Russians' real revenue declined in January-September declined by 1.2% year-on-year, according to state statistics agency Roskomstat, which may be one explanation of the increased borrowing. Apparently, Russians are tired of trying to save money and their consumer behaviour has therefore been shifting towards borrowing as opposed to waiting for a time when their revenue begins to grow again.
Russia’s state-owned retail bank reduced the rates for consumer loans from RUB250,000 by 0.4-7.4%age points. Rates on loans in the amount of RUB250,000 to RUB500,000 will cost 14.5-15.5%, and those above RUB500,000 will be charged at 12.5-13.5%, according to Interfax.
Sberbank has dropped its lowest mortgage rate by 0.3% to 8.6%-9.7% per annum as falling Central Bank of Russia (CBR) rates make borrowing in Russia increasingly affordable. This rate is well below the 12% rate above, which the government was offering subsidies to encourage Russians to buy their homes and also to bolster the flagging banking sector last year. Mortgage lending has become one of the most profitable businesses for banks. The CBR cut its overnight monetary policy rate to 8.25% last month in the latest of run of cuts and as inflation dropped to a new historic low of only 2.7% at the start of November – well below the 4% target rate for this year – the regulator may cut rates again at its November meeting. However, restrictions apply to
61 RUSSIA Country Report December 2017 www.intellinews.com