Overall lending growth in Russia still substantial, corporate lending rising very quickly - Central Bank's Nabiullina

SOCHI. Sept 26 (Interfax) - Latest data for September indicate that overall lending growth remains substantial, while corporate lending is growing very rapidly, Central Bank Governor Elvira Nabiullina said at the 21st International Banking Forum organized by the Association of Russian Banks.

"The banking sector itself feels comfortable - a big capital reserve, profit, banks pay dividends, by the way, a third of it goes to the budget. Some of the profit remains in the banks' capital, which enabled them to increase lending. The increase in the key rate is gradually affecting lending activity, but there is no question of lending coming to a halt. Data for July-August and flash data for September show that overall credit growth remains substantial," she said.

But Nabiullina said the effect was uneven across segments of the credit market. "And if we compare it with the second quarter, there has been a slowdown in retail, while corporate lending remains very high, with year-on-year growth of 21.4% in corporate lending. This is a high growth rate," she said. This year segments that are not susceptible to the key rate "such as a significant portion of housing construction projects, lending for investment projects that have already begun, and many projects in machine building" account for up to half of the growth in corporate lending, she said.

Lending has slowed considerably in other segments, she said. This also applies to mortgage lending, although the pace there is probably reaching an equilibrium. "This is how it should be if tight monetary policy is being pursued. There is a noticeable slowdown in mortgage lending as well. If we compare it with the first half of the year, then in July-August, issuances actually decreased by about half, to 350 billion rubles per month. But we should not consider this to be a dramatic drop, because these are actually the rates that we saw in 2022, and we are in fact talking about returning to balanced rates of mortgage growth that will not cause demand to overheat or housing prices to soar. If issuances seen in July-August continue until the end of the year, then the mortgage portfolio will grow by about 12% for the year. This is as high as lending growth that we still consider to be balanced can go," Nabiullina said, adding that it was possible to be comfortable with this pace of lending.

Fairly high growth rates are also expected in consumer lending for the year. "Consumer lending is supported by higher incomes, consumer confidence. There was a slowdown in this segment also in July-August, here both key rate increase and the tightening of our macroeconomic measures played a role, and we also expect fairly high growth of 17% for the year. Of course, this is mainly due to the first half of the year, but this is also a high growth rate," Nabiullina said.

"From the point of view of monetary policy, from the point of view of the impact on inflation, what is important for us is not the pace of growth in individual segments, but how the overall loan portfolio is growing. Overall lending growth in the economy should be moderate so that the capacity to expand output of goods and services can catch up with surging demand. There is no other way to achieve low inflation," she said.