Give - take

Russians are not stopped by rising loan prices

Rosbank intends to raise car loan rates by an average of one or two percentage points. The first deputy chairman of the bank's board, Igor Antonov, told reporters about this yesterday. Rosbank is far from the first financial institution that, amid the crisis, is tightening conditions for lending to individuals. Before him, this had already been done by Sberbank, Bank of Moscow, Raiffeisenbank, Avangard, MDM Bank and many others. Market participants, however, note that, despite the rise in prices for loans, the demand for them from the population remains very high.

Loan rates for both private and corporate clients have been rising for a year now. At first, this was due to the rise in price of borrowed money in foreign markets. Now a new wave of growth has begun - it has become finally clear that the era of cheap money has not just sunk into oblivion, but moreover, most likely the situation will only get worse. Global GDP growth, including Russia's, will slow down, inflation will increase, and real incomes of the population will fall. Therefore, it is not surprising that banks are now massively raising rates on all types of loans. In particular, at the beginning of this week, the largest Russian bank, Sberbank, raised the yield on mortgage loans by 0.75-2.25 percentage points, and on consumer loans by one percentage point. Many banks, by the way, almost simultaneously with increasing loan rates, raised the yield on deposits. For example, Rosbank increased rates by an average of 1.4-2 percentage points, Sberbank, Bank of Moscow, Absolut and many others increased rates. “In mid-September, we raised rates on all types of consumer loans by an average of 1-1.5 percentage points, in addition, we tightened the requirements for issuing mortgage loans, in particular, the minimum down payment is now 30%,” says managing director Block "Retail Business" of the Bank of Moscow Alla Tsitovich. “At the same time, we increased deposit rates by an average of one percentage point.”

“Now, when making decisions on rates, banks look at each other’s interest rate policies, assess the cost of funding, and try to quickly respond to changes,” says Anatoly Krainikov, head of the retail business marketing department at MDM Bank. “The market situation should finally clear up by the end of the year, then it should become clear in which direction the banking business will develop in the medium term.” According to one expert, despite the increase in loan rates, the demand for them from the population remains very high. “Banks have greatly tightened the requirements for borrowers, most clients are denied loans, so those who ultimately receive money don’t even look at the rate, they are happy that they were given money,” says the newspaper’s interlocutor at a large Russian retail bank .

Since not all financial institutions now have enough funds to issue loans, in the current situation those banks that have enough long-term money are the winners. In particular, yesterday Igor Antonov from Rosbank promised to increase the volume of mortgage lending by 50% within a year. “Until recently, we weren't very active in this market,” he said. “Over the next year, we intend to significantly increase our portfolio.” DeltaCredit Bank, which, like Rosbank, is controlled by the French Societe Generale, is also quite active in the mortgage market. Apparently, both banks are counting on the support of the parent company. At least Mr. Antonov said yesterday that the management of Societe Generale has already promised to help its “daughter” as a last resort.

However, if we talk about general trends in the market, it is obvious that the growth rate of mortgages will slow down. As stated in yesterday's analytical report by Alfa Bank, by the end of this year the volume of the mortgage market could reach up to $55 billion. And in 2009, mortgages will lack sources of growth. “Now that rates are expected to rise over the next few years, banks are less willing to increase the volume of long-term mortgage lending in their portfolios,” Alfa Bank said in a report. Another reason for the slowdown in the growth rate of this market is the increase in the number of overdue loans. “As we expect prices to decline somewhat in 2009, the level of overdue payments should rise along with them. Because of this, banks will be forced to tighten requirements for borrowers, which will lead to a further slowdown in lending growth,” Alfa Bank analysts note.

Natalia ROMANOVA