Page 77 - RusRPTMay20

The total value of mortgages issued in the first quarter of this year soared by 22% to RUB760bn ($10.3bn) ​according to DOM.RF as Russians looked for ways to protect the value of their savings in a time of heightened volatility. “The real estate sector saw an impressive spike in the demand in March that came 20-30% ahead of the companies’ plans, as clients rushed for housing in times of the local currency volatility and uncertainties associated with mortgage rates,” VTB Capital (VTBC) said in a note. “As a result, residential prices have added a blended 10% YTD.” The environment also pushed people to conclude approved mortgages and conduct a purchase, the investment bank reports.
The government issued a document that establishes the limits for retail loans that can be restructured for borrowers ​who have been affected by the COVID-19 crisis on April 6. Banks will be able to provide six-month credit holidays to borrowers whose income has dropped at least 30% and who hold loans of up to RUB250,000 for consumer loans, RUB300,000 for entrepreneurs, RUB600,000 for car loans and RUB1.5mn for mortgages. According to RBC, the announced restrictions limit the potential pool of loans to 72% of consumer loans, 41% of car loans and 32% of mortgages.
The limits suggest that the restructuring will mostly take place outside Moscow and St Petersburg, where the average tickets for mortgages and car loans exceed the minimum requirements. However, according to Forbes, the cap for mortgages can be reviewed upwards to account for the higher average tickets in the two cities (in Moscow, the average mortgage is RUB4.8mn).
We expect banks’ CoR to reflect the shock in the 1Q-2Q20 results, with a rise in both general and specific provisions to levels comparable with 2014-15. However, given the limited leverage on the corporate side (relevant for Sberbank) and hefty margins (in the case of TCS), we expect both banks to stay profitable in 2020.
77​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com