Business daily Vedomosti.ru reports on the analysis performed by the Russian Central Bank, indicating that the risk levels for consumer lending are underestimated. The Central Bank selected a group of 32 Russian banks that provide unsecured consumer loans and analyzed their performance and risk exposure.
The analysis revealed that the retail lending portfolio of the selected banks grew by 46.5 percent year-on-year, faster than the overall average annual growth of 41.7 percent for all banks. Industry experts are concerned that the report might motivate more banks to expand their consumer loans portfolio, as the profitability of the respective market segment is two times higher than the average, primarily due to high interest rates. However, the percentage of bad debts is also quite high, ranging between 10.1 and 19.1 percent. The Central Bank took notice of this and stated that the provisions for consumer loans are lower than the average, which might indicate inadequate risk assessment. Within the 32 analyzed banks, non-performing loans represented 8.6 percent of the consumer loan portfolio, while the respective provisions amounted to 6.4 percent. However, it is difficult to estimate the real magnitude of the potential problem, as the banks often sell their outstanding debts to debt collectors, thus removing them from their balance sheets. On October 1, 2012, the capital adequacy ratio for the selected banks was at 13.1 percent, somewhat lower than the overall average of 14 percent.
Analysts believe that the volume of bad consumer debts in Russia will increase in 2013, as the growth of lending continues to outpace the growth of real income. High deposit interest rates represent another risk factor, as smaller banks usually offer higher than average rates, thus attracting clients who are likely to leave the bank as soon as other, more attractive options become available. Experts do not expect to see any signs of “overheating” yet, as the ratio of retail lending to private deposits was at 56 percent in November – meaning that the citizens still remain a net borrower in the banking system. This year, Sberbank and VTB24 already announced their intention to enter the unsecured consumer loans market.