Page 63 - RUSRptSept18

Third comes the construction sector . High demand for mortgages led to a 7.6% growth in credit to the sector in the first half of 2018, following three years of decline.
The CBR report also names several problem sectors, the most notable of, which is the manufacturing industry. Formerly the driver of credit growth across the corporate sector, manufacturing increased borrowing by only 0.7% in the first half of 2018, down from 7.4% growth in 2017. Without directly naming Rusal, the CBR notes that credit volumes to the metallurgical industry have fallen due to sanctions.
Consumer lending is back and the total volume of loans topped RUB1.4 trillion in the first seven months of this year , the CBR reported on August 14.
Consumer credit has surged in the first half of the year almost five times as fast as real disposable incomes . Loans without collateral are expanding at a double-digit clip for the first time since 2014.
Unsecured loans -- used often for home renovation, travel and purchases of goods such as home appliances -- currently account for around half of the total stock. Russia’s largest electronics chain, M.Video, estimates that about a fifth of its products are bought with credit or on installment plans.
Consumer lending was all but wiped out during the “silent crisis” of 2014-2016. Retail loans are one of bank’s more profitable products but the CBR increased prudential provisions to cool growth, afraid of a consumer credit bubble. However, following the collapse of oil prices and the associated deep devaluation of the ruble at the end of the same year and consumer lend volumes collapsed.
Consumers are borrowing to refinance their old debt. Since the beginning of the year, the indebtedness of Russians to banks has grown by 11.6% as of the end of July, according to the CBR. By August 1, the retail portfolio amounted to RUB13.6 trillion, an increase of RUB1.4 trillion over the same period a year earlier.
Compared to 2017, the growth of the retail portfolio almost doubled: in January-July of last year, loans to individuals increased by 5.2%, Vedomosti reported. At the same time, the growth rates of real incomes of Russians, according to Rosstat, have been fluctuating about zero for several months already: in May they grew by 0.3% in annual terms and by 0.2% in June, Rosstat reported. Another change is the increasing share of mortgages in the consumer borrowing make up.
Consumer credit growth in Russia gained over 15% year-on-year in June
and May 2018, and by over 20% in seasonally adjusted terms, outpacing the growth in real wages and savings. Retail deposits growth declined to 7% in the same period, according to the data from the Ministry of Economic Development.
In July the Central Bank of Russia (CBR) said it will tighten the regulation on unsecured consumer loans , after already having acted several times to prudentially cool consumer lending to avoid a credit bubble.
Corporate loans increased by 2.8% only in June, which is alarming for the Ministry of Economic Development that already braces for the growth slowdown in 2019 due to the VAT hik e.
For the first half of the year, the mortgage portfolio grew by 10.6% to RUB5.9 trillion . The portfolio also grew due to unsecured consumer loans that supported the revival of consumer demand, as well as auto loans, the CBR
63 RUSSIA Country Report September 2018 www.intellinews.com