Credit expansion in Russia slows down in November

According to vedomosti.ru, the growth of bank lending in Russia in November slowed down noticeably compared to the last nine months, as well as to the same period last year. Corporate lending in November grew at a rate of mere 0.2 percent, down from 1.4 percent in October, while the growth of retail lending slowed down less dramatically, from 2.9 percent in October to 2.4 percent in November. The respective figures for November of last year were significantly higher, with corporate lending growing by 3.4 percent, and retail lending by 3.1 percent. Regardless of what is probably a welcome slowdown, the Russian banks are expected to generate approximately 1 trillion rubles (USD 32 billion) in aggregate net profit by the end of the year.

The decrease in demand for corporate lending did not come as a surprise to Russian bankers, as some major Russian companies successfully floated bonds on the domestic and international markets during 2012. In addition, some large Russian companies publicly announced their plans to reduce investments in this year.

The decrease in demand is not the only reason for slower lending growth – according to the Russian Central Bank, 40 percent of the 68 largest Russian banks (controlling approximately 85 percent of total banks’ assets) increased their corporate lending rates during the third quarter of 2012, and 15 percent of the top banks raised financial requirements for borrowers.  

The total corporate lending portfolio of the Russian banks reached 19.8 trillion rubles (USD 640 billion) in November, significantly higher than their total retail lending exposure of 7.6 trillion rubles (USD 24.5 billion). According to the Russian Central Bank, slower lending growth is more in line with the economic fundamentals. The annualized growth of corporate and retail lending in June 2012 reached 24 and 44 percent, respectively; by the end of 2012, corporate lending is expected to grow by 15-20 percent on an annual basis, while the growth of retail lending will be around a moderate figure of 15 percent.

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