Large banks will reduce lending rates following the Sberbank

Monday, may 16, Sberbank announced the reduction of interest rates on consumer loans by 1.1–4.1 percentage points.
Now interest rates on such loans are in the range of 14.9–22.9 per cent (previously 16,5–25,5%), loans without collateral — 15,9–23,9% (up to 17.5–26.5 per cent), says the official message of the Bank. Sberbank explained that “the General economic situation. We are talking about excess liquidity in the banking sector. “Reduction of rates on loans and on deposits is a common trend that has more to do with the transition to the surplus liquidity in the banking sector, says Fitch analyst Alexander Danilov.

The growth of ruble liquidity in the banking sector is directly linked to the Federal budget deficit, which the Finance Ministry is financed from the Reserve Fund. “In 2015-2016, the Treasury and the Federal subjects of the Russian Federation have become much more active place funds on deposits, which is one of the sources of inflow of liquidity at the beginning of the calendar year”, — stated in the materials prepared by the Association of regional banks “Russia”. As explained by an analyst at Raiffeisenbank Denis Poryvai, the money supply is in the banking sector. But last year the money did not lead to the emergence of surplus liquidity, because banks used them to repay debts to the Central Bank, says the analyst.

Sberbank is not the only Bank reducing or planning to reduce interest rates on loans. Five of the 15 interviewed banks — Gazprombank, “XMB Discovery”, Moscow credit Bank, alpha Bank and Binbank — are also preparing to cut rates. Moscow credit Bank will cut rates by 1-3 percentage points since may 23. “Minimum interest rate on consumer credit to our payroll clients will be 16%”, — said the press service of the ICD.

Gazprombank is planning to cut rates on consumer loans by 0.5 percentage points, and reduce mortgage rates for some categories of borrowers, said the press service of the GPB.

The Bank is considering lowering interest rates on consumer loans during the second quarter of 2016, but will look at market conditions, said the Bank. In “XMB Opening” are also preparing to cut rates, but to inform details has refused. Alfa-Bank said that the credit organization is planning in the near future decrease in rates considering market analysis.

Some banks have reduced interest rates on loans in April. So, the PSB reduced rates on all consumer loan products on average by 2 percentage points, said in response to the press-service on request . The Bank has also reduced rates on some products, and some the contrary increased.

VTB 24 and the retail division of VTB (formerly “Bank of Moscow”) is ready to reduce rates to the public only if the Bank of Russia reduces the key rate. This was said during a conference call Deputy President – Chairman of Board VTB Herbert Moos.

In Rosselkhozbank, UniCredit Bank and Raiffeisenbank did not respond to a request .

Senior banking sector analyst “Aton” Michael Ganelin says that the decision was influenced by the banks as excess liquidity and positive expectations on inflation and the overall gradual improvement in the economic situation. Now banks need to boost lending, which is now declining, he said.

However, reducing rates on loans, it is unlikely banks will approve much more loans, says S&P analyst Anastasia turdyeva. In the last two years experienced a decline in consumer lending in an unstable macroeconomic situation, the banks reduced appetite for risk, and borrowers become less active, said Turdieva. “In a situation where real incomes are not growing, significant credit growth only because of the reduction in rates should be expected,” concluded she.

Banks at the same time seeing an increase in demand for loans. So, in VTB 24 in the first quarter of 2016 sales of cash loans increased 7 times in comparison with the 1st quarter of 2015. In Gazprombank in 2016, the demand for loans has increased in 2 times compared to the same period last year. This is a common trend for the segment of consumer credit: according to the National Bureau of credit histories, in the 1st quarter of this year, the number of credits granted to population grew by 40% compared to the same period last year. At the same time, in comparison with the previous quarter, loans to 1 quarter of 2016 decreased by 24.7%