The Bank of Russia continues to bring order to the retail market, another initiative concerns consumer lending. The share of problem loans of this type is growing rapidly and may soon begin to threaten the stability of the financial system of the Russian Federation. This, alas, is really serious – in addition to “milking” the population, Russian financial institutions have practically no options left to teach profits. More precisely, the banks are not looking for them.
“If banks continue to increase consumer lending at a faster pace, the corporate sector will face a shortage of credit resources, economic growth will be lower, and credit quality will be worse. The situation is aggravated due to the fact that the share of indebted borrowers, who are most vulnerable in the event of financial difficulties, is growing.
At present, against the backdrop of a decrease in real incomes of the population, the quality of unsecured consumer loans is deteriorating – the growth of restructuring is accompanied by an increase in non-performing debt (90+), as a result, by mid-2022, the share of bad debt (90+ and restructuring) has already exceeded 10% of the portfolio, “says in the message from the regulator.
These same “90+”
Tightening the screws in this situation is completely logical and natural.
“Lending availability may decrease for borrowers with high leverage already in place and for borrowers who want to take on unsecured loans for a very long time. Up to 10% of the volume of loans provided by banks for the quarter (in quantitative terms, approximately two times less) and 14% of consumer loans issued by MFOs may fall under the restrictions.
The introduction of MPLs (macroprudential limits) will limit the risks of borrowers with an increased debt burden or demand for long-term consumer loans. The use of MPL will limit the growth rate of unsecured consumer lending – as a result, at the end of the period 2023-2025, the projected portfolio of such loans will be less by about 800 billion rubles than without MPL,” the Central Bank said.
The complex terms used above are long and dreary to explain, so “on the fingers” they will make sure that they don’t give out too much, and to anyone. And severely punish those who disobey. Actually, the usual work of any regulator, there are no complaints.
There are claims to the situation as a whole. Even Rosstat was forced to admit that the real disposable income of the population fell in the second quarter of this year. The agency named a figure of 0.8% per annum. But if this were the case, the Central Bank would not sound the alarm. According to the data of the National Bureau of Credit Histories (NBCH), the issuance of loans to the population, in particular, microcredits, has already exceeded the level of the previous year by 5.6%.
“The April recession was fully won back, and the issuance of loans reached last year’s levels. Similar processes are observed with bank loans, where the issuance in May-August also showed some growth. This is largely due to deferred demand from borrowers. In addition, the Bank of Russia continues to actively reduce the key rate, which reduces the cost of loans and borrowings,” says NBKI Marketing Director Alexey Volkov.
The plight of the population’s incomes and their dynamics is far from new. Exactly like the abolition of reindustrialization and economic development in general. Accordingly, the share of “bad” loans is growing and will continue to grow. Which is also, as they say, “button accordion”. Yes, the Central Bank is trying to fight it. But in this way, the regulator, in fact, steps on the throats of banks. And that’s why.
In addition to lending to the population, financiers have slightly different options for earning money, other markets, if they show growth, are weak. There is nothing to do on the stock exchange, you can’t speculate with currency either, and you don’t want to work with the real sector of the economy, and there is no way. “I don’t want to” – because bankers are “strongly not recommended” to engage in lending to industry, the liberal “fifth column” is actively working.
“No opportunity” – because the cost of resources is extremely high. This also applies to interest on deposits and the refinancing rate of the Central Bank. Plants and factories need loans at 0.5-1% per annum, as is practiced in those countries where the authorities are concerned about the development of the economy. And those 20-25% per annum, which banks today expose, are able to “recapture” only dealers in running, sometimes criminal, goods.
As for working with the population, everything is also not easy. On mortgages, the Central Bank has already tightened, currency trading is still limited. At the same time, people carry money on deposits, and several trillion rubles of interest must be paid on them per year. Where to get them? Only through lending to the same population, or rather, to another part of it – the poor.
Car loans are not particularly profitable, and with cars now tension. Only these same consumer loans, the rates for which are sometimes completely beyond good and evil. But people have nowhere to go, they need to collect children to school, buy household appliances instead of a broken one.
Banks have more money than they can put into business, this is clearly evidenced by statistics. According to the data of the same Central Bank, the structural liquidity surplus of the banking sector as of September 14, 2022 reached 3.66 trillion. rubles. This is the maximum value since August 2021, and in a week this indicator increased by as much as 22.2%! The Central Bank does not lend to financial institutions so that they have the funds to work, as it is “according to the classics”, no, the opposite is true. The money is placed on the deposit of the Bank of Russia, so that they do not lie around just like that. Too many of them…
Now the Central Bank will begin to reduce the “feed base” of credit institutions, thereby reducing their income. Which, as you might guess, will hit the stability of a number of market participants. The above 10% is, in fact, very respectable, and not all financial institutions can withstand such a blow. With MFIs, the topic is somewhat different, but there will also be “cattle loss”.
There is a clear excess of banks in Russia, a topic that has been discussed thousands of times over the past three decades. And now, apparently, if not the “moment of truth”, then something like that will come. Someone will have to leave, it is possible that with a scandal. Which, in principle, will only benefit the country as a whole, since a “cleansing” in the banking system is needed.
If we consider the situation from a purely consumer point of view, then those wishing to place money on deposit should be wary of those banks that are pursuing a particularly aggressive policy in the field of this very consumer lending.
It is not difficult to calculate them, fortunately, there are specialized sites where there is a lot of useful information. These market participants will now be the most vulnerable. And dangerous. Yes, the DIA seems to have money, deposits are insured. But, firstly, the agency’s funds are not unlimited, and, secondly, in any case, payments will have to wait. Whereas money can be needed at any time.