In the second quarter of this year banks have reduced interest rates and reduced private credit conditions the main categories of borrowers compared with the first quarter, according to the information-analytical Bulletin of the Central Bank, prepared by the survey of banks 54. These banks control more than 80% of the volume of debt on loans to organizations and population of Russia.
The reason for the improvement was the high level of competition and the reduction of the key rate of the Bank of Russia (10 June by 0.5 percentage points to 10.5% per annum), according to a survey.
The easing of credit conditions for all major categories of borrowers in the second quarter and contributed to expectations of banks, inflation and key rate of the Bank of Russia, stated in the Bulletin. Also there is an improvement of funding conditions in the domestic financial markets — cash, Deposit and others. For example, the average maximum rate on ruble deposits in 10 banks — leaders of this market in the last decade of June 2016 amounted to 9.23% APR (in the last week of March – 9.77% APR)”, — said the Central Bank.
“In the second quarter also had a favorable situation with Bank liquidity, largely associated with the increase in Federal spending funded including a contingency Fund. It also contributed to the easing of Bank credit conditions,” — noted in the Bulletin.
A more noticeable trend of easing credit conditions in the segment of unsecured lending, and this applies only to some borrowers with high credit ratings. But the requirements of corporate customers continued to tighten due to negative trends in individual sectors of the economy, said the Central Bank.
Half of the respondents of the Central Bank banks in the second quarter of this year reduced interest rates on consumer loans. The average interest rate on short-term loans to individuals in rubles in June was lower by 2.1 percentage points than in March, and accounted for 21,9% per annum, the rate on long-term loans — lower by 0.1 percentage points to 17.4% per annum.
Interest rates on loans to small and medium business decreased 42% of banks surveyed. The average rate on ruble loans to small and medium-sized companies for all periods up to 1 year decreased for the second quarter by 0.2 percentage points to 16% per annum in June. The average interest rate on long-term loans to SMEs over the same period increased slightly from 15.4% to 15.6% per annum.
In the mortgage sector to lower interest rates was reported by 31% of the banks, while 8% of banks raised mortgage rates. As a result the average rate on ruble-denominated mortgage loans increased from 12.9% in March to 13% per annum in June 2016.
In addition, some banks increased the maximum loan term for consumer loans to corporate borrowers and borrowers of small and medium business. Banks have also introduced additional products and expanded the composition of the categories of potential borrowers, softened in the retail segment, the requirements for collateral on loans.
Loans will be available by the end of the year
The survey also showed that the availability of credit for all categories of borrowers in the second half of 2016 will rise. In particular, some non-price terms can be mitigated for some loan programs. “However, continuing in the non-financial sector of the economy, the negative trends hinder the substantial easing of non-price terms, and some banks reported the possible introduction of additional measures to control the solvency of borrowers,” the document States.
In the segment of lending to large companies 18% of banks expect easing credit conditions in the third quarter, 6% of the banks allow the possibility of tightening conditions.
The Bank estimates that the number of potential borrowers who have sufficiently high level of creditworthiness will continue to fall, which will stimulate increased competition among banks and reduce interest rates on loans. Non-price credit conditions are expected to remain moderately hard.
Prospects for increasing the availability of credit for small and medium business banks were evaluated more favorably than large companies.
In the segment of retail lending banks expect the most favourable dynamics of the terms of lending. Net share of banks that reported a possible easing of conditions on consumer loans in the third quarter amounted to 40 percentage points in the fourth quarter — 35 PPT
Engine — mortgage
Russian banks expect in the third and fourth quarters of 2016, the increase in demand for mortgage loans due to a decrease in interest rates and the completion of the state program of subsidizing interest rates on mortgage loans for new buildings. The increase in demand for mortgages in the third quarter expect 45% of the Respondent banks, in the fourth quarter — 51%. “Only a few banks believe that demand for mortgages in the future will decrease”, — the document says.