Debt load has peaked
The debt burden level of the Russians at the beginning of 2022 broke a record. Citizens spent 10.6% of their monthly income on loan repayments. That’s 0.4 percentage points more than in the first half of last year. should From the Bank of Russia Financial Stability Review. Moreover, in March-April 2022, the regulator recorded a significant increase in the share of consumer loans with the next missed payment – from 5.3% to 7.5%. The Central Bank said that this factor may already affect the growth risks in overdue loans in the coming months. The regulator did not provide the dynamics of the debt load for the first quarter of 2022.
“Whether the debt burden will increase depends on two factors – the growth rate of lending and the growth rate of income. [населения]”, – the first deputy head of the National Bank Ksenia Yudaeva said at a briefing.
The Russian Banks Association is confident that the debt burden will decrease in the near future. “There has been an increase in the indexation of social payments in recent months, and the total debt of citizens is decreasing. It can be assumed that the debt load of the Russians will be adjusted downwards. To what extent – it will be clear when the statistics for the current year will appear, ”said Alexei Voylukov, vice-president of the Russian Bank Association, in an interview with socialbites.ca.
According to him, the relatively weak growth in the number of delayed loan payments in March-April 2022 also speaks of a reduction in the debt burden of the Russians in the future.
Banks say otherwise
Russian banks interviewed by socialbites.ca announced the reverse trend, an increase in consumer loans. The number of loans granted and loan demand increased in May compared to previous months.
“In the period of March-April, our bank recorded a decrease in the number of consumer loans. However, already in May, issuance increased by one and a half times. Now the bank is seeing an increase in loan demand and expects to reach pre-crisis levels in June.”
The growth trend in consumer loan issuance was also recorded in Ural Reconstruction and Development Bank.
“The number of loans given by the bank in May of this year increased by 208 percent compared to April 2022. The number of consumer loan applications at UBRD is already 3.5 times higher than in March,” said Maria Komina, spokesperson for the bank.
The head of the consumer loan center at Rosbank, Igor Dmitriev, noted an increase in the number of loan applications from citizens. “The number of applications for cash loans in May increased by 38% compared to March 2022. The average check also increased from 440 thousand rubles to 515,000,” Dmitriev said.
Bank “DOM.RF” noted a recovery in consumer loan demand: in May, the volume of applications almost returned to the values at the beginning of the year.
The increase in the consumer loan demand of the citizens was facilitated by reducing the interest rates from 18% to 6.9-13% in May. This was reported to socialbites.ca in a number of Russian banks, including Otkritie, Alfa-Bank and UBRD. Rosbank also plans to revise the terms of issuing loans to citizens after the key rate is lowered.
Both debts and defaults will grow
According to Egor Dakhtler, an analyst at BCS Mir Investments, the drop in the key interest rate is directly affecting the growth of Russian interest in consumer loans. However, he said against the background of the boom in loan demand, banks will be more cautious about approving loan applications in the coming months.
“This could lead to a short-term reduction in the debt burden. But by the end of the year, the situation may change regardless of how banks lend to customers. There may be economic risks that are likely to adversely affect the real incomes of the population. And of course, by the end of the year, this negative effect may become more pronounced and lead to an increase in debt burden indicators,” he said.
Associate Professor of Finance for Sustainable Development at the Russian University of Economics agreed with him. G.V. Plekhanov Maria Ermilova.
“It looks like the load will increase by the end of the year. Now loans have become more attractive and necessary. If the situation in the country becomes more complicated, citizens will try to close the loans, incomes will decrease so that the delay and the amount of debt do not grow. This is particularly dangerous because some loans are secured with collateral that can be lost. The situation will most likely begin to stabilize before 2023, ”said Yermilova.
Expert RA Agency Banking Ratings Director Ivan Uklein also pointed to the risks of a negative situation in the Russian economy in the second half of the year.
“The Russian debt burden will be more strongly affected not by the interest rate conjuncture, but by the general situation in the economy, by the dynamics of prices and unemployment after the “adjustment” of industries in the third or fourth quarter of 2022. Therefore, theoretically, it is not possible to exclude both the increase in the debt burden and the increase in overdue loans.
Source: Gazeta
Barbara Dickson is a seasoned writer for “Social Bites”. She keeps readers informed on the latest news and trends, providing in-depth coverage and analysis on a variety of topics.