Bank of Russia: Retail lending bounces back in May - The Industry Spread

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Bank of Russia: Retail lending bounces back in May

June 25, 2020

Key balance sheet indicators of the banking sector remained almost unchanged in May, although consumer activity started to revive, according to the new issue of the information and analytical review Russian Banking Sector Developments in May 2020.

The corporate portfolio remained nearly the same (+2 billion rubles, or +0.01%). After the surge in March—April, this may suggest that demand declined due to the long holidays and that companies partially restored their cash flows. Conversely, retail lending was picking up in May (+43 billion rubles, or +0.2%). This is still below the 2019 monthly averages, but is better compared to April’s decrease (-0.7%). According to the survey of a range of major banks from among the top-30, the retail portfolio expanded owing to mortgage loans, while unsecured consumer lending continued to shrink. Among other factors, mortgage lending was boosted by the 6.5% programme for subsidising interest rates.

May recorded diverse trends in funding. Household deposits slightly contracted (-39 billion rubles, or −0.1%), which is typical of May. Legal entities’ funds moderately increased (+77 billion rubles, or +0.3%), which is a positive sign after April’s downfall (-1.9%).

In May 2020, the banking sector’s net profit decreased to 0.5 billion rubles over the month. It was largely dragged down by losses incurred by a range of banks as a result of foreign currency transactions on the back of the ruble strengthening, as well as by relatively high profit tax expenses (primarily related to the high performance in Q1 since the tax is calculated with a time lag). There was also a moderate increase in reserve fund contributions (according to up-to-date information).

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