UPDATE: Cbank: Unsecured consumer, car loans add 0.4–0.7 pp to GDP

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MOSCOW, Jun 28 (PRIME) -- Unsecured consumer loans and car credits contribute 0.4–0.7 percentage points to Russia’s gross domestic product (GDP), the central bank said in a report on Friday.

“Even if we suppose that the purchasing price if imported goods stands at no more than 50% of their ultimate price, the corresponding deduction from the GDP should be cut by more than 0.25 percentage points – the 50% share of imports in consumption multiplied by 50% of the purchasing price of imports. Taking this into account, the credit momentum from unsecured consumer loans and car loans may be seen at 0.4–0.7% of GDP,” the report read.

The contribution of expansion of unsecured consumer loans and car loans to consumption is higher than contribution to the GDP, but it is not a major factor that boosts consumption. Slowdown in unsecured consumer lending will reduce its contribution to the GDP in the short term, but it will support consistent growth in the long run, the regulator said.

The share of bad debts in the unsecured consumer lending segment shrank by 3 percentage points on the year to 8.6% in May, while in absolute terms bad loans contracted by 7.6% as the banks are working with them and write them off. Still, the portfolio of unsecured loans jumped 25.3% on the year to 7.9 trillion rubles as of May 1.

A 33% increase in cash loans and a 20% growth in issuance of credit cards were the major contributors to the increase in unsecured consumer lending in 2018–2019. Contribution of the two factors to portfolio of unsecured loans of state-controlled banks stood at 67%. Nevertheless, the quality of unsecured loans is high, and the share of loans with payments that are overdue by more than 90 days is in the range of 2–2.5%, the central bank said.

Toughening of oversight over unsecured consumer loans would allow banks to form additional reserves that would cover possible losses if a crisis similar to a 2014–2015 crisis happens in Russia again.

The regulator has raised markups to risk ratios four times since the beginning of 2018, and additional capital of banks that are focused on consumer lending stands at 1.3–3.1 percentage point of their capital adequacy ratio. In the monetary terms, the reserve of capital of 24 largest retail lending banks excluding Sberbank stood at 190 billion rubles as of May 1. The October 1 toughening of the control over the sector should raise the reserve to 288 billion rubles.

If dynamics of the unsecured consumer lending stay the same, new markups to risk ratios would lead to the capital reserve rising to 693 billion rubles as of October 1, 2020, the regulator said.

But Economic Development Minister Maxim Oreshkin again told the central bank to curb consumer lending growth and focus on stimulation of investment as a source for economic expansion.

“I thought that the central bank understands macroeconomics better. They have an interesting logic that the more people are in the debt pit the better. Explanation: the Bank of Russia’s goal is to maintain combined demand so that inflation is stable. It is obvious that given the current level of combined demand, growth becomes faster if the share of investment in its structure rises, not the share of current consumption of mainly imported goods,” Oreshkin said on his Facebook page.

“One should seek the ways to solve the existing problems better instead of searching for excuses,” he said.

(63.0452 rubles – U.S. $1)

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