Banks significantly increase their loan portfolios in Q2
Retail loans over the quarter increased by 7.1%, corporate loans — by 3.9% in the midst of economic recovery, household income growth and, probably, borrowers' expectations for an increase in rates. This is stated in the analytical review Banking Sector based on the 2021 Q2 results.
The quality of loan portfolios is stable, and the cost of risk (CoR) is at historically low levels (0.2% for corporate loans and 1.4% for retail loans in Q2). This is due to a better economic situation, a rapid growth of loans, as well as a partial release of reserves built at the peak of the COVID-19 pandemic. In the future, we should expect an increase in CoR (the ‘normal’ level is about 1% for corporate loans and 2% for retail loans) as the portfolios ‘mature’, as well as due to a significant volume of restructured loans, some of which may require additional provisioning.
The sector's quarterly profit increased to 610 billion rubles (from 564 billion rubles in 2021 Q1) resulting from an active credit growth and low cost of provisioning. Net interest margin increased by 0.2 pp to 4.4% in Q2, mainly because customers hold a significant amount of funds in current accounts, which have not yet responded eagerly to the rate increase. In the future, the interest margin may decrease somewhat, as banks have launched higher deposit rates, which can lead to the overflow of some current accounts into deposits.
Capital adequacy remains unchanged (the N1.0 ratio was 12.6% as of 30 June 2021), which is due to an almost comparable increase in equity (+1.5%) and risk-weighted assets (+1.7%). Despite a high profit, the capital growth was modest due to a large volume of dividend payments.