BOFIT Viikkokatsaus / BOFIT Weekly Review 2020/07
The credit stock of Russian banks grew by 6 % in nominal terms last year, down from 12 % growth in 2018. The most notable slowdown was seen in corporate borrowing, which increased by just 1 % y-o-y. Since approximately a quarter of corporate bank loans are issued in foreign currencies, shifts in the ruble’s exchange rate affect the value of the corporate credit stock reported in rubles. Overlooking exchange rate changes, corporate borrowing from banks was up by 4 % in 2019 (up 5 % in 2018). The low growth in corporate borrowing was caused by low investment demand and rapid growth in the corporate bond market. The stock of corporate bonds on issue rose by about 15 % in 2019.
The weak demand for large-scale corporate borrowing has forced many banks to get more involved in retail banking. This is reflected in the rapid growth of housing loans and consumer credit. Despite slowing growth, the stock of household credit grew by over 18 % in 2019. The growth in unsecured consumer credit continued at a worrying pace (up 20 %), although slowing down from 2018.
About half of Russia’s bank lending consists of corporate loans, while household loans account for another quarter. Russia’s banking sector is highly dependent on customer depositors, and about half of the deposits come from households. Even with declining interest rates, household bank deposits grew by 10 % last year.
The CBR reports that banking sector profits, when adjusted for comparison, contracted last year by about 10 %. Russia had 442 operating banks at the end of 2019.