BOFIT Viikkokatsaus / BOFIT Weekly Review 2017/26
The stock of corporate bank loans has contracted since early 2016, but in recent months the contraction seems to have halted. The corporate loan stock (corrected for exchange rate shifts) showed slight on-month growth in April and May. However, measured on-year, the stock of corporate loans continues to contract (down 2 % in May). The recovery of corporate lending has been supported by factors such as improved bank earnings and declining interest rates this spring.
The share of non-performing loans (NPLs) has remained at about 7 % of the total corporate loan stock throughout the past 12 months. However, the share of bad loans, which is a more comprehensive measure (including loans in categories IV and V) had increased to 11 % of the total corporate credit stock at the end of March. The Central Bank of Russia says that the amount of NPLs has been raised by reassessments of the loan stocks of banks in restructuring. This year, there has been 25 banks in the restructuring process overseen by the Deposit Insurance Agency. Among the newcomers to the restructuring process was Peresvet, earlier one of Russia's 50 largest banks.
Many NPLs involve the construction sector. As of March, over a fifth of non-performing ruble loans and 28 % of all bad loans were loans to companies in the construction sector. Forex loans of construction sector companies in particular have been restructured and converted to rubles, so forex loans now only represent about 12 % of construction sector borrowing (down from 25 % earlier). Forex loans currently represent about 30 % of the total stock of corporate borrowing. A large part of forex loans are held by companies operating in branches like mining and chemicals & petrochemicals that often have significant forex income flows.