CBR puts retail banks' return on capital at minus 6.8%
MOSCOW. June 23 (Interfax) - The return on capital at Russian banks that specialize in unsecured consumer lending was minus 6.8% at the end of the first quarter of 2015, compared to plus 2.8% at the beginning of 2015, the Central Bank of Russia said in a financial stability report.
The retail banks whose main business is issuing unsecured consumer loans are generally considered to be Home Credit and Finance Bank (HCFB) , TCS Bank, Renaissance Credit Bank , OTP Bank (MOEX; BISI) and Vostochny Express Bank, among others.
"Recovery in return on capital at banks specializing in unsecured consumers loans will be slow," the Central Bank said.
In order to reduce the burden on capital and optimize expenses, retail banks are cutting back their affiliate networks and expanding the practice of ceding loans to outside collection agencies. The volume of those cessions totaled 132 billion rubles in Q1 2015 and 142 billion rubles in Q4 2014.
The reduction in return on capital is also due to the increase in non-performing loans to individuals. As of April 1, the share of problem consumer loans overdue more than 90 days for the entire banking sector was 14.2%.
"The share of bad loans can be expected to peak (16.5-17.0%) in 2015-first half of 2016," the Central bank said. For the most part, this represents loans that were issued in 2013 becoming overdue.
