Business
Household Debt in Russia Over 170 Billion Euros
By Emma Terchenko, Vedomosti, January 31, 2018
Feb 12, 2018 - 9:14:50 AM

Household Debt of Russians Exceeds Twelve Trillion Rubles, Half of This Amount Was Borrowed Over the Last Year

This emerges from statistics gathered by the United Credit Bureau (OKB), based on information about the outstanding loans of 82 million Russians.

According to the Russian Central Bank, the Russian populace’s bank debt grew by 13.2% in 2017 to 12.2 trillion rubles [approx. 170.75 billion euros].

The OKB’s calculations show the number of new loans grew more slowly than their total amount. Over the past year, loans increased by 37% compared to 2016 (by 4.14 trillion rubles), whereas their quantity increased only by 12% to 34.8 million individual outstanding loans.

Moreover, an increase was observed in all segments of the loan market—mortgages, cash loans, auto loans, and credit cards—according to the OKB’s statistics.

Banks mostly disbursed money to Russians in the form of cash loans: nearly 3 trillion rubles or 33% more than in 2016. The number of such loans reached 24.7 million units, an increase of 14%.

The total amount of mortgages issued for the year increased by 42% to 1.8 trillion rubles, while the total number rose by nearly a third to 959,237 individual mortgages. According to Rusipoteka, a financial analytics company, 53% of the housing mortages issued last year were supplied by Sberbank.

In November, the mortgage portfolios of Russian banks exceeded a record five trillion rubles, the Central Bank reported previously.

“Afer the crisis, banks tried to build up their mortgage portfolios. Many of them reduced their down payments to accomplish this. Therefore, amongst the loans issued last year, around a third had down payments of less than 20%,” says Rusipoteka director Sergei Gordeiko.

According to the OKB, auto loans for all of 2017 increased by 36% to 333.3 billion rubles or by 25% to 436,539 individual loans. The National Credit History Bureau (NBKI) estimated the annual growth of auto loans at 29%.

“Auto loans have returned to pre-crisis levels, and the share of cars bought on loan has been growing,” notes NBKI’s director general Alexander Vikulin. “In 2017, every other automobile in Russia was purchased with a loan.”

The OKB claims credit cards are the fastest growing segment. Although the number of new credit cards issued last year grew only by 8% to 8.65 million cards (this figure excludes replacement cards), their total limit increased by less than half: by 48% to 544.5 billion rubles.

According to the NBKI, the number of newly issued credit cards grew by 52.6% to 6.87 million units in 2017. Equifax reported an 52% increase to six million new cards issued on the year.

The reason for the discrepancy is the databases of creditors monitored by the various credit bureaus differ. Unlike other credit bureaus, the OKB receives all information about loans made by Sberbank, which, according to different estimates, accounts for 42% to 46% of the loan market. The NBKI, for example, does not monitor figures from Home Credit Bank. None of the three bureaus—OKB, NBKI, and Equifax—take Russian Standard Bank’s statistics into account.

With its share of the credit card market, Sberbank has an impact on discrepancies in the calculations of the OKB and the other bureaus, argues Frank RG director general Yuri Gribanov.  According to Frank RG’s data, based on the management statements of banks and taking into account the utilization of credit limits and overdue debts, Sberbank’s portfolio of credit cards and overdrafts constituted 42.5% of the overall portfolio of all Russian banks as of December 1, 2017. During the year, it grew by 16.4% to 559.6 billion rubles.

A Sberbank spokesperson did not provide exact figures for the issuing of new credit cards last year, but confirmed they had not grown, remaining at a “consistently high level.”

Tinkoff Bank issued 2.41 million new credit cards in 2017, 43% more than the previous year, while Sovkombank issued more than a million credit cards. Vostochny Bank increased its issuing of credit cards by 140%, OTP Bank, by 135%, and VTB Bank by 13% (440,000 cards).

“The main reason for the growth is that banks have returned to sales channels that were frozen after 2015, for example, lending to walk-in customers,” says Alexei Shchavelev,  director of the cross-selling department at OTP Bank.

“In addition, many banks now have built up a broad base of quality customers: payroll customers, debit card holders, borrowers. It is now much easier for them to sell credit cards, because this customer base has been clarified,” Pavel Samiyev, managing director of the National Rating Agency, explains.

The demand for credit cards from borrowers themselves has been caused by the growth of consumer activity in general and improved customer solvency, argues Rostislav Yanykin, director of Russian Standard’s credit card sales. In the fight for customers, banks have been offering increasingly advantageous terms for using credit cards, he admits.

People who take out loans to boost their standard of living have mainly fueled the growth in lending to the populace, argues Nataliya Orlova, chief economist at Alfa Bank.

“In the past two years, they suffered more than others from the crisis in terms of reduced purchasing power.”

According to NBKI’s Vikulin, retail lending has been growing due to the economy’s stabilization.

NB. According to a May 17, 2017, article in the New York Times, household debt in the US had risen to $12.73 trillion in the first quarter of 2017, a new peak. Converted into rubles, this would amount to approx. 742 trillion rubles at current exchange rates. Based on the latest UN estimates, the current population of the US is nearly 327 million people, while the population of the Russian Federation is nearly 144 million people, based on the same estimates. In 2016, GDP (PPP) per capita in the US was over $57,000, while it was just over $23,000 in Russia, according to figures published by the World Bank. TRR