‘There will be no such dynamics anymore’ — business lending records in Russia come to an end?

Lending fell sharply in March and April, the loan portfolio of SMEs will decrease by a year, experts warn

‘There will be no such dynamics anymore’ — business lending records in Russia come to an end?
Photo: Ilya Repin

In February, SMEs borrowed almost 1 trillion rubles from banks, or half as much as a year earlier, according to newly published data from the Central Bank. Thus, the debt of entrepreneurs to banks has reached almost 8 trillion rubles, and Tatarstan businesses are among the leaders of the Volga region in terms of loans issued (224 billion). At the same time, the share of overdue loans in the republic has decreased to 5,74%. However, Realnoe Vremya experts pessimistically believe that successful indicators should not be expected and “there will be no such dynamics anymore”. After the start of the military special operation in Ukraine, “the issuance of loans has slowed down sharply”, and a decrease in the loan portfolio and an increase in delinquency are expected by the results of March-April.

Issuance of loans slowed down sharply in March-April

The Central Bank has released the latest successful indicators of lending to small and medium-sized businesses in Russia. The number of loans in February (there are no data for March yet) has increased by 11,1% and amounted to 201,384. The number of borrowers has increased by 9,6% to 179,660. Both indicators exceeded the values of February last year by 1,7 times.

During the month, SMEs borrowed almost 1 trillion rubles (964,6 billion) from banks, or half as much as a year earlier (+46,6%). But there will be no more such record figures, experts warn.

“The Central Bank's data does not yet take into account what happened in March and April. That is, February is the last month for which there are full statistics on the dynamics of lending. In general, all last year and the beginning of this year were very successful in terms of the dynamics of lending in all segments. Statistics show that the number of borrowers was growing steadily, and the volume of lending, and the volume of issuance, and the portfolio of loans to small and medium-sized businesses, and large enterprises — there was a growth everywhere. Actually, every month since the middle of the previous year, the SME loan portfolio reached a historical record. As of March 1, by the results of February, we see that a record was once again broken, but I think that by the results of March-April, the portfolio will decrease or at least will not grow, because the issuance has slowed down sharply. Some part of the loans are being repaid, and, in fact, even despite the credit holidays, prolongations, the volume of issuance was very small and, of course, such dynamics will no longer be," says economist, CEO of Businessdrom analytical agency Pavel Samiev.

Retail trade and car repairs took out loans most often in the country

According to the Bank of Russia, the average loan size in February amounted to 4,8 million rubles, which is by 0,4 million more than a month earlier. However, a year earlier, banks issued large sums to small and medium-sized businesses — an average of 5,6 million. For comparison, the average loan size to borrowers from large businesses was equal to 347 million.

Banks mainly lent to businesses in the following industries: Wholesale and retail trade; repair of motor vehicles and motorcycles — 40,2%, Manufacturing — 12,1%, Professional, scientific and technical activities — 11,7%, Construction — 11,4%.

The weighted average interest rate on short-term (for up to a year) loans in rubles increased by 0,53 percentage points compared to January and amounted to 11,63% per annum. The weighted average interest rate on long-term (for a period of more than a year) loans increased by 1,71 percentage points and amounted to 11,75% per annum.

Retail trade and car repairs took out loans most often in the country. Photo: Maksim Platonov

The volume of loans issued in February to legal entities and individual entrepreneurs amounted to 6,371 trillion rubles, which is by 18% more than in January and 17% more than a year earlier. Loan debts to legal entities and sole proprietors increased to 44,92 trillion rubles, annual growth rate increased compared to the previous reporting date and amounted to 20%.

Overdue debt decreased compared to the previous month and amounted to 2,846 billion rubles, or 6,3% of the total amount of debt.

Tatarstan is the leader in the Volga region and in the top 5 in Russia

With an amount of over 33 billion rubles, our republic has become the leader in the volume of loans issued to small and medium-sized businesses. This is the highest figure in the Volga Federal District, and only Moscow (193 billion rubles), St. Petersburg (118 billion), Moscow Oblast (55 billion) and Krasnodar Krai (45 billion) are ahead of the subjects of Russia.

Tatarstan entrepreneurs' debt to banks is also one of the highest — 224 billion rubles. The share of overdue accounts for 12 billion, or 5,74% — the average in the Volga Region. The highest share of overdue debt in Dagestan is over 49%.

The absolute leader in SME debts is Moscow, the amount exceeds 2,3 trillion rubles, and overdue loans — 233 billion.

According to Pavel Samiev, the all-Russian trends are generally repeated in lending to small and medium-sized businesses in Tatarstan. However, in terms of portfolio quality, the republic looks better than most regions, which the economist sees as the merit of numerous preferential programmes:

“In Tatarstan, the dynamics were within the all-Russian trend. There were good indicators in terms of issuance, the number of borrowers, and the volume of loans, up, again, until February of this year. Then — the same considerations, we are waiting for what will happen by the end of March-April and beyond: delays will obviously increase, most likely there will be a reduction in the number of borrowers, disbursements and volumes of loans. In general, these are the same trends that will occur throughout Russia. Tatarstan, in terms of portfolio quality, looked better than the national average, in particular for lending to small businesses — it was noticeable. And there were also more preferential programmes, which was also a driver of credit growth. Such programmes, of course, are in good demand. Actually, everything will depend on how concessional lending develops this year.”

“In April we will see an increase in the share of delinquency”

According to Pavel Samiev, the statistics of the Central Bank do not yet reflect the economic effect of Western sanctions. Speaking about what factors may influence the dynamics of lending in the future, the speaker again focuses on business support measures. Perhaps, on the charts in the future we will see a repeat of the pandemic situation.

“It is difficult to say what will happen next, because soft loans will play a very important role here. But these programmes are only now developing, and I think we will feel their impact already in the third quarter of the year. And the volumes will be large, and the number of borrowers may be the same as in the pandemic — there will be new borrowers who have not been lent before. During the pandemic, there was a sharp increase in the number of borrowers. Then they were paid off, and the number of borrowers fell, then began to grow again. This was due to preferential programmes. Perhaps, this year these measures will have such an effect," the expert believes.

Speaking about the factors influencing the dynamics of lending in the future, the speaker focused on business support measures.

The interlocutor of the publication also draws attention to the quality of the loan portfolio. The economist notes that over the past year the share of delinquency has been declining in Russia as a whole, but with a drop in lending the situation may change dramatically:

“It is clear that with the growth of lending, the relative share of delinquency fell. It fell in the portfolios of loans and legal entities, and of corporate large borrowers, small businesses, that is, there was a decrease everywhere due to that there were a lot of loans. The portfolio grew due to new loans, and in general the situation was favourable, there was no deterioration in the quality of service.

The situation is different now. Firstly, many borrowers are really in a difficult financial situation. Secondly, if the growth rate of the portfolio falls, or rather even if the portfolio shrinks, in April we will see an increase in the share of delinquency. This will happen simply against the background of that the dynamics of lending has changed dramatically — there are fewer loans, and, accordingly, the delay will immediately become more noticeable. But it is also worth remembering about restructuring and repayment holidays, which many borrowers use, this will restrain the growth of delinquency," the analyst concluded.

Emil Ziyangirov