Sberbank analyses myths about consumer lending ‘bubble’

  • Banking
  • 16.08.2019 01:47 pm

Under the SberData project (Sberbank's initiative on processing and analysing big data), Sberbank has researched the consumer lending market: wage dynamics, interest rates, period and amount of loans, refinancing, expense structure and other aspects. The fast growth of retail loans over the past two years caused concerns over a possible bubble on this market.

Data of Sberbank, Bank of Russia, Rosstat and lending bureaux don’t support the concerns: the lending growth was objective and has not yet been exhausted.

A significant, but one-off factor was the nominal wage growth, especially of the smallest ones, in 2017-2018. According to Sberbank, the average salary of its clients who had received up to RUB 15,000 in 2017 increased by 42% in 2018. The results of other categories were more moderate: the growth speed smoothly decreased from 17% in a year for clients who receive RUB 15,000-30,000 on average in 2017 to 4% for all employees with more than RUB 100,000 salary.

An important factor is the minimum monthly wage growth by 48% over the same period. According to Sberbank, the average wage increased by 12.1% in 2018, compared to 2017.

The costs of not only new, but also many granted loans through refinancing and interest rates cuts by the banks themselves decreased over two years. It approximately increased potential market size by 20%. According to analysts’ estimations, about 17% of provided mortgage loans in 2018 and 14% of provided consumer loans were related to the refinancing. 

The non-target consumer loan provision increased by 24% in a year. In general, 69% of non-mortgage loans are unsecured consumer ones, the second place is taken by credit cards (10% of the whole retail lending market). Sberbank’s analysts believe that they are very likely to play a more important role than non-target consumer loans.

Sberbank also managed to estimate their use structure. It turned out that they are not expenses to make ends meet, but quite the contrary. About half of them are related to repairs (22% of visible part of expenses), purchase of long-term use goods (18% of visible expenses: electronics, household equipment, furniture, clothes), then car (not a purchase, but repairs, spare parts, etc.) The third place is taken by tourism and vacations (7%) and transfers (8%) that can be payments for repairmen.

An important factor of borrowers’ creditworthiness is a high level of early repayments. The average mortgage payment at Sberbank is by 4 times higher than a scheduled payment, and the consumer loan payment — by 2.3 times higher. The 15-year loans are paid off in seven years on average, three-year consumer loans — in two years. The early repayment level in the bank has significantly grown in recent two years; it doesn’t prove the version of citizens’ debt overburden.

The bank’s analysts can see no reasons to be afraid of the average loan amount growth: it mostly grows due to the fact that the most small and expensive loans left the market under the Central Bank’s pressure.

However the Central Bank’s measures made small and expensive loans to leave the banking system to microfinance organisations. In this not quite transparent and weakly regulated sector, the share of borrowers with large amount of loans, the lending to borrowers with a delay of more than 90 days thrives; 86% of new loans to problem borrowers receive loans in microfinance organisations.

5% of all borrowers have loans in microfinance organisations, and no loans in the banks so far. Three year ago, this number was only 1.5%, at the same time the number of borrowers at the banks who received loans in microfinance organisations increased up to 7%, compared to 3% in 2015.

At the same time, all banking metrics of the portfolio quality and estimations of lending record bureaux, on the contrary, are at the historically high levels. Sberbank’s analysts agreed that a cautious approach to consumer lending will be beneficial, but all trends are still manageable using the traditional risk management.

The SberData research pays attention to the first signs of the consumer lending decrease that will amount to modest 8-10% in a year. However, the mortgage will inevitably continue to grow in the next years, and, despite all risks and challenges, the retail lending will still an essential area of the development of the Russian banking segment for years.

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