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Business / Finance

Banks — good people — bad?

Banki.ru: themes of the day 27.08.2018 at 21:02

Banking and financial news on the website Banki.ru

Against the background of predictions about the imminent systemic banking crisis, banks increase lending and lower interest rates on deposits. What happens in the banking system and why this is not very good customers?

In 2017, the Bank of Russia reduced the key rate six times from 10% to 7.75% per annum. This year, the regulator has slowed the pace of easing of interest rate policy and to date were limited to only two cuts rates — from 7.75% to 7.25% per annum. In its press releases, the Central Bank noted that the current level of interest rates, on the one hand, it has no detrimental effect on the loans, and with another — is still an attractive savings. Dynamics of banking sector development in current year confirms the words and logic of action of the regulator, however, has several notable features.

Corporate portfolios recover, retail — slow down

In January — July 2018 the total volume of loans granted by the banking sector to non-financial organizations (companies and enterprises) and individuals, increased by 6.6%, which almost twice exceeded the growth rate of the total portfolio for the entire 2017 (3.5 percent). Part of the contribution to the positive dynamics has made the currency revaluation, however, the dynamics of ruble loans also confirms a General trend of acceleration of lending. Thus, the portfolio of ruble loans to nonfinancial organizations and individuals grew in the first seven months of 2018 8.6% against growth for the whole of 2017 7.1%. However, the key factor in this dynamic is that the acceleration of the pace of lending occurs when the recovery of the corporate segment and the slowdown in risky and preinflation retail.

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So, loans to companies and organizations for seven months of 2018, increased in volume by 4.6% against growth for the whole of 2017 only 0.2%. Including the dynamics of growth of ruble lending to Russian companies and enterprises in the first seven months of 2018 almost twice exceeded the dynamics of growth for the entire 2017 (6.9% and 3.8%, respectively).

In turn, the retail credit portfolio of banks has increased for seven months of 2018 11.4%, against a growth of 12.7% in 2017 (growth of ruble loans amounted to 11.6% and 13.4%, respectively). The growth remains in double digits. However, after increasing from September 1, 2018 risk weight for unsecured consumer loans, you can expect a gradual slowdown in lending to single marks. Furthermore, an additional contribution to the slowdown, according to Central Bank estimates, making the stricter requirements of banks to the selection of borrowers and the ongoing replacement of the not so favorite TSB unsecured loans welcome mortgage (according to the regulator, half of the growth in retail lending in the first half of 2018 has been provided by the mortgage loans).

Tools of the Central Bank lending vs

However, speaking about the revival in corporate lending this year, we should not forget that the weak growth of corporate portfolios of banks in 2017 largely offset by Bank loans through the purchase of bonds. So, in 2017, the bond portfolio of Russian companies on the balance sheets of banks grew by 42.5%, or 600 billion rubles. Another 116 billion rubles has increased the portfolio of bonds of RF subjects and local governments (plus 42%). All the absolute growth of loans to companies and enterprises in 2017 accounted for only 58 billion.

With the beginning of 2018 lending to the economy in the form of purchase of bonds of non-financial organizations and subjects of the Russian Federation has slowed sharply, while the overall growth rate of banks ' investments in debt securities remained high and exceeds the rate of growth of credit portfolios. For the first half of the current year (on August 1, 2018 on the breakdown of banks ' investments in debt obligations at the time of this writing were not yet available) portfolios of bonds of subjects of the Russian Federation grew only by symbolic 8.8 billion rubles (plus 2.2%), and portfolios of bonds of Russian companies and all were in slight negative territory.

Despite this, the overall growth of banks ' investments in debt obligations since the beginning of 2018 was 7.5% and fully came in the so-called coupon bonds of Bank of Russia (COBRA) used by the regulator to absorb the excess rouble liquidity in the banking system. If at the beginning of August, 2017, these bonds are generally absent on banks ' balance sheets by the beginning of 2018, the volume of investments in them amounted to 340,3 billion rubles, and by the beginning of July 2018 is already 1.1 trillion rubles.

Thus, if the aggregate loan portfolio of the banking sector companies increased for the first half of 2018, to 1.2 trillion rubles, at the same time almost the same amount of liquidity from the banking sector "took" and bonds of Bank of Russia.

While the COBRAS are just one of the tools to absorb liquidity, complementing the main instrument of the Central Bank — Deposit operations. The total volume of funds placed by banks on Deposit at the Central Bank by 1 August 2018, amounted to 2.5 trillion rubles. Another 1.5 trillion roubles in the same period accounted for the COBRAS, and 1.9 trillion roubles were on correspondent accounts at the CBR. As a result, total liquidity of the banks placed with the Central Bank amounted to 5.9 trillion rubles, which, for clarity, equivalent to 44% of the loan portfolio of individuals or 19% of the loan portfolio non-financial institutions. At the beginning of 2018, the ratio was about 41% and 15%, respectively, at the beginning of 2017, only 26% and 9%.

the Absorbing operations of the Bank of Russia are a tool of the Central Bank to curb inflation. However, inflation rates are at historically low levels for a long time, and the volumes of active transactions of banks with the Central Bank only continue to grow, creating competition actually lending.

Liquidity — more, the rate for deposits — lower

One of the main sources of funding of active operations of banks are the deposits of individuals. In their latest press releases to the decisions on the key rate of the Central Bank noted that, despite a decrease of ruble interest rates, deposits remain attractive for the population. Indeed, during the first seven months of 2018, the population's deposits in rubles, comprise nearly 80% of all public funds, increased by 4.3%, an increase over the same period in 2017.

However, focusing on the deposits as the basis of resource base of banks (almost a third of liabilities at 1 August 2018), it is not necessary to forget and about other sources of liquidity and funding significantly gained weight in recent years. So, if the volume of deposits of physical persons has grown for January — July 2018 at 1.1 trillion rubles (in particular, ruble deposits up 0.88 trillion roubles), funds of corporate customers (accounts and deposits) increased in total by 1.3 trillion rubles (ruble resources by 0.9 trillion roubles). The increase in available funds of companies and enterprises on Bank accounts and deposits was the result of active state support for individual sectors and enterprises in the conditions of sanctions pressure and the economic downturn. Thus, according to the Bank, the net inflow of liquidity into the banking system for budgetary channel for the first half of 2018 amounted to 1.1 trillion rubles, providing, thus, a significant portion of the increase in corporate client commitments in the liabilities of the banking sector.

Another major source of growth of the liabilities are funds raised from the Bank of Russia (plus 0.9 trillion rubles in January — July 2018). It should be noted that in terms of structural surplus liquidity, banks only occasionally attract small amounts of money from the Central Bank for individual refinancing instruments. Overall growth in lending, the regulator since the beginning of 2018 is primarily the result of allocating an impressive amount of funds for the Bank bailout.

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In the result if since the beginning of 2018 means the population has provided an increase in liabilities of the banking sector more than 1 trillion rubles, the inflow of budget liquidity in client accounts and resources of the Bank of Russia together have contributed to the banking system almost twice that amount. Free liquidity flowing to banks, practically revokes the biggest players in the need for price competition for investors. To verify this, just look at the offers of the largest banks in Deposit products: for a long time the credit institution, in fact, restrict the inflow of population, forming the most unattractive ruble rates and other non-price terms and conditions. While the banks themselves have a unique ability to place free liquidity in risk-free instruments of the Central Bank with a yield of above 7% per annum, which is much more attractive than the burden of a risk lending to the economy.

The population in this situation, not only deprived of the opportunity to somehow increase savings in a "paper" decline in inflation, but remains double-digit rates for most loan products.

the Information and analytical service Banki.ru