Central Bank 'comfortable with' 20% growth in retail lending
MOSCOW. July 29 (Interfax) - The Central Bank of Russia is comfortable with overall growth in consumer lending at 20% a year, the deputy head of the bank's financial stability department Sergei Moiseyev said.
Commenting on his meetings with representatives of banks that specialize in the retail business, Moiseyev said: "Their situations vary quite a bit: there are banks that plan zero growth in the portfolio this year, although the majority plan to maintain expansion," he said.
Growth in unsecured retail loans at those banks had amounted to as much as 60% previously; this year growth in the 30%-40% range is expected, he said.
"We would be comfortable if it was closer to 20%, because 20% means growth in stable bank obligations. It would be interesting for us, for supporting a stable trend in the bank business, if retail lending also grew at those stable rates," he said.
The Central Bank conducts monitoring of the results at about 30 banks specializing in retail. "They aren't that big: they account for about 9% of assets and about 15% of retail deposits," he said.
Their growth rates continue to outperform the overall market. "The market increased by 8.6% in the first quarter; they were up 9.3% in retail lending. In the first half the market expanded 13.7% and they grew 17%," Moiseyev said.
The director of the CBR's financial stability department, Vladimir Chistyukhin explained why the Central Bank is concerned about the rapid growth of unsecured consumer lending.
He said the CBR is particularly concerned that borrowers' debt to income ratio (DTI) is at about 33%, meaning that individuals with unsecured consumer loans are spending a third of their incomes on debt payments. "It would seem that one could say that this is not a fatal figure, not super high, but on the other hand, we have information from working with lending organizations that the average income of such a borrower is 20,000 to 40,000 rubles," Chistyukhin said.
So if a borrower has an income of 30,000 rubles per month, 10,000 rubles goes toward debt payments, 10,000 rubles covers utilities and only 10,000 rubles are left for food and clothing, he said. "Obviously, no financial reserve is left for individuals in this kind of situation. And any change in the structure of their incomes or spending will lead to them having certain difficulties with servicing the debt," Chistyukhin said.
In addition, there have been distortions in interest rates on retail deposits at banks focused on retail banking, he said. "This is because lending organizations that specialize in this business, in order to expand their activity, are prepared to attract the funds of individuals at higher rates, in other words on more unfavorable terms for themselves, assuming that this will be covered by higher rates on unsecured consumer loans. This in turn is pushing the whole main market to raise rates," Chistyukhin said.
Furthermore, he said, lending at high interest rates is eroding the effectiveness of the Central Bank's monetary policy, because changes in the refinancing rate and other key rates do not have much of an impact on the behavior of such lenders.
Lending in this sector is also clearly drawing resources away from corporate lending, Chistyukhin added.
