What is the main risk of mass loans to the population
Russians have again begun to actively borrow money from banks. In May, the issuance of consumer loans increased by 3.4 times compared to the same month last year and reached a ten-year record of almost 663 billion rubles, according to Frank RG analysts. What is the reason for such a consumer boom and can it lead to the formation of a credit «bubble» in the market in the future?
Part of the consumer optimism can be attributed to record employment in Russia and the growth of the payroll precisely because companies lack workers and are seeking to raise wages to attract them. Rosstat in April recorded a historical minimum of unemployment at 3.3%. At the same time, the same department claims that the average salary of Russians increased by 6% over the year. In March this year, it amounted to 71.3 thousand rubles. Banks saw all this and began to actively offer consumer loans to Russians, since the rates on them are higher than on other loans. “The growth in the volume of bank cash loans issued in May is largely due to a change in the policy of banks,” — approves Svetlana Zubkova, Associate Professor of the Department of Banking and Monetary Regulation of the Financial University.
However, most analysts believe that the record growth in consumer lending in May this year is due to the «low base» effect. Remember last spring: a high key rate, the dollar and March at 120 rubles, sanctions against Russia are introduced in packages, large brands leave the country, and all this is superimposed on a general feeling of anxiety and uncertainty. It is clear that people are not up to loans in such conditions. “In the spring of 2022, consumer lending in Russia first, in March and April, collapsed to the levels of 2015, and stagnated in May due to the high interest rate, — reminds the leading analyst of Freedom Finance Global Natalya Milchakova. — This year, the key interest rate of the Central Bank of the Russian Federation remains quite low, at the level of 7.5% per annum, while inflation has slowed down sharply. In other words, in 2023, the situation works just to ensure that people borrow money more actively.
The effect of deferred demand is also felt: the Russians postponed their purchases and repairs “until better times” over the past year, but in the spring of this year they decided to act. “The volume of growth in the retail lending market in May 2023 is more logical to compare with the April values of this year, and not with May 2022, — Artur Meinhard, head of the analytical department for global markets at IC Fontvielle, says. — The fact is that a year ago, at the end of May, the key rate of the Bank of Russia was still at a fairly high level — eleven%. Borrowings were too expensive to take. This year, it was not lending to the population in general, but consumer lending, that is, cash lending, that saw a record increase. The Russians need money to cover their needs, and if we consider the results in this vein, then this is more of a negative trend than a positive one, the analyst noted.
However, the market will continue to grow. The Bank of Russia predicts an 8-13% increase in unsecured lending by the end of this year. “That is, the regulator itself expects that the growth in consumer lending in Russia this year may be double-digit, and such a figure is not at all considered a possible threat to the banking sector,” — Milchakova points out. The very pace of lending will depend on the levels of interest rates. So far, according to the latest Central Bank statistics on average market values of the total cost of consumer loans, they range from almost 11.9% to 32.9% per annum, depending on the goals, terms and security. “Those are pretty high levels, — notes Ilya Merzlyakov, head of the sales department of AM Capital. — If we take 2021 for comparison, then there the range was from almost 8.9% to 24.3%.
But even with such rates, the emergence of a credit «bubble» in Russia this year and the next few years is unlikely, although it is not completely excluded. According to Milchakova, if the Central Bank of the Russian Federation keeps the key rate at the level of 7.5% per annum this year, the rates on loans for the population will remain at quite acceptable levels for the developing market.