Retail lending growth slows down


In June, the Bank of Russia recorded a slowdown in retail lending growth and now expects an increase in rates in the segment. On the one hand, such dynamics is a consequence of the actions of the regulator itself, aimed at reducing high-risk lending. On the other hand, in the context of the promised increase in the key rate of the Central Bank and the deterioration in the quality of servicing already issued loans, the slowdown in lending may be higher than expected, experts warn.

The Central Bank published a review, according to which, according to preliminary estimates, in June the regulator observes the first signs of a slowdown in retail lending. Nevertheless, expectations of growth in household demand for new loans in the second half of 2023, recorded in the preliminary results of the survey of bank lending conditions (UBC) in the second quarter, create conditions for maintaining a fairly high growth in the banking portfolio in the short term, the Central Bank noted.

According to the regulator, retail lending in May 2023 grew by 2%, in April the portfolio growth rate was 1.7%, and in March – 1.8%. As a result, the portfolio of loans to individuals reached RUB 29.4 trillion for the first time in May. According to the forecasts of the Central Bank, announced in mid-June, mortgage issuance in Russia in 2023 will grow by 13-17%, consumer lending – by 9-13%.

“On the horizon of the third and fourth quarters, there is room for further upward adjustment in lending rates due to <…> plans of the Bank of Russia to start tightening monetary policy in the coming months, the Central Bank believes. In the retail segment, some growth in rates may additionally be facilitated by the ongoing measures to cool activity in the segments of mortgages with a low down payment and consumer loans to borrowers with a high debt load ” .

In May-June, according to operational estimates of the Bank of Russia, lending rates in the retail segment increased moderately. In January-June 2023, the current interest rates on retail loans increased by 1.25-1.75 p.p., which, in the context of mediocre income dynamics of the population, led to a certain slowdown in lending, sublimated by June, notes independent expert Andrei Barkhota.

Probably, the market has approached the line, after which the long-awaited deficit of effective demand began to really affect the volume of loans, says Yury Belikov, Managing Director for Validation at Expert RA. “The total retail portfolio will continue to grow until the end of 2023, but much more slowly than in the first half of the year,” he clarifies. “Until the end of 2023, the upward dynamics of rates may continue as a premium for increased credit risk.”

According to the estimates of Anna Avakimyan, chief analyst at RegBlock, in the mortgage lending segment, interest rates on loans may increase by 1.5–2 percentage points by the end of the year, the sales funnel will narrow in the consumer lending segment, and banks will look more conservatively at limits on such loans. “Much will depend on servicing loans issued in 2022,” the expert adds. “In the event of an increase in defaults, the caution of credit institutions will be even higher, and by the end of the year we will see negative real lending growth rates.” The worsening of debt servicing by the population, Andrei Barkhota adds, will significantly reduce the level of approval of such loans.

Ksenia Dementieva, Yulia Poslavskaya

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