Banks can increase lending to economy: 2019 data

The growth rate in retail lending dropped to 18.6% in 2019 compared to 22.8% in 2018. Moreover, it slowed markedly over the last four months. Growth rates declined in both unsecured consumer lending (owing to the Bank of Russia’s regulatory measures aimed at limiting expansion of this segment) and mortgage lending (this was partially technical in nature and caused by securitisation transactions). The quality of retail loans does not currently cause any concern, although unsecured lending is growing amid the continuing gradual rise in debt burden.

Corporate lending increased only slightly in November—December, largely impacted by seasonal factors. In general, the growth rate of corporate lending in 2019 (+4.5%) was somewhat lower than in 2018 (+5.8%) due to weak demand from companies as they extensively raised borrowings through bonds.

The inflow of household deposits reached +4.0% in December, pushed up by seasonal factors, and their total growth in 2019 amounted to 10.1%, which is significantly higher than in 2018 (+6.5%), despite a marked decline in deposit interest rates.

December saw the highest growth rate (+3.1%) in 2019 of corporate deposit and account balances, which was driven solely by seasonal factors. Overall, corporate deposits and account balances increased by 4.4% over the past year.

The structural liquidity surplus remained at a high level (2.8 trillion rubles), despite a slight reduction. In addition, banks possess a larger amount of marketable collateral that may be used to secure additional refinancing if needed. The foreign currency liquidity cushion (nearly 43 billion US dollars as of 1 January 2020) is also sufficiently comfortable.

In December, pre-tax profit in the banking sector amounted to 166 billion rubles (net profit — 129 billion rubles). By the end of 2019, banks’ pre-tax profit totalled 2.0 trillion rubles, and net profit — 1.7 trillion rubles (+73% vs 2018). However, excluding the technical income related to the implementation of IFRS 9 and the financial results of the banks managed by the Fund of Banking Sector Consolidation Asset Management Company, net profit slightly shrank to 1.3 trillion rubles (from 1.5 trillion rubles in 2018).

Regulatory capital was up by 5.5% as long as assets at risk demonstrated a slower growth than retained profit. The capital cushion available makes it possible to expand lending by more than 20 trillion rubles. Moreover, the new approach to assessing credit risk effective from 1 January 2020 that provides for several categories of borrowers with decreased risk ratios (as related to the requirements for small and medium businesses and investment-grade borrowers) will help release banks’ capital to a certain extent and create more possibilities for lending.