Page 66 - RusRPTDec19
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8.1.2 Loans
In 2019, half of Russian borrowers spent more than 50% of their monthly income on loan payments, the economy ministry reports. This is a marked increase from last year, when 42% of borrowers did so. According to economy minister Maxim Oreshkin, the growth of consumer lending (19.8% y/y in October) is becoming a serious social problem and could lead to massive non-payments in 2021. Oreshkin aims to decrease the share of Russians with a personal debt burden ratio of 50% or higher by 10 percentage points annually until it hits 10% in 2023. Some experts question the economy ministry’s assessment. The National Rating Agency believes the share of borrowers with a personal debt burden ratio over 50% was 23-25% in 2018 and will grow to roughly 30% by the end of 2019. The central bank, furthermore, notes that spending more than half of one’s income on loans does not necessarily mean that a person is seriously indebted. Some borrowers with high incomes have significant funds to cover their living expenses even after loan payments.
Retail lending growth decelerated further in October to 19.8% y/y, the lowest annual rate since August 2018, while monthly growth this October was 0.9% m/m, the lowest monthly growth since February 2018. October was the first month of PTI, and, according to the CBR, the new regulation likely had an impact on retail lending.
Corporate loan growth remained sluggish at 4% y/y and YTD in FX-adjusted terms, although it grew 0.8% m/m in FX-adjusted terms. Sector earnings reached R1,696bn in 10m19, up 43% y/y, affected by lower provisioning charges due to the implementation of IFRS 9. The CBR expects the sector's 2019 earnings to reach around R1.9 trillion.
Fitch Ratings sees signs of a retail lending overheating in the latest Russian Banks Datawatch 3Q19 report published on October 1, as the share of debt repayments in consumers disposable income reaches a record high.
As reported by bne IntelliNews, throughout 2019 the Central Bank of Russia (CBR) and the largest banks have been debating with the government the extent of the overheating on the retail lending market and unsecured loans in particular.
Retail loans grew by about 14% in 9M19, Fitch notes, estimating that for the full year retail loan growth could reach 17%-20%.
At the same time, “in banks, the average credit profile of loan applicants and the quality of outstanding exposures are deteriorating, and more clients are using credit cards for living expenses,” the agency warns.
In a separate report Vedomosti daily cited the presentation of CBR at the Crediting-2020 conference, according to which the debt burden on Russian population has reached its highest level since 2012 at 10.6%, the share of debt servicing costs to disposable income.
Over half of the employed Russian population have outstanding loans, or 54% (39.5mn people) of which 80% is unsecured credit, but the quality of the loans is considered by the CBR as adequate.
Analysts surveyed by Vedomosti d aily agree that retail lending sees signs of overheating, but note that it is not across the board and fragmented geographically and by income groups. The persistent growth of 18%-20% is seen as dangerous and could lead to a spike in defaults and drop in loan quality.
66 RUSSIA Country Report December 2019 www.intellinews.com
