Bad debt crisis.

For the second quarter in a row, the quality indicators of Russian banks' loan portfolios have been deteriorating, this is happening against the backdrop of rosy forecasts for macroeconomic development. Unfortunately, during the period of structural restructuring of the economy, rapid growth of GDP does not prevent the development of a banking crisis.

Something similar happened in the first quarter of 2001, when, against the backdrop of a slowdown in lending growth rates and concerns about maintaining the growth rates of Russia's GDP, there was a slight increase in the share of overdue debt of enterprises. But then the second quarter put everything in its place - and after a short pause, both lending growth and improvement in credit quality indicators continued. But in the first half of 2002, the growth of overdue debt among the largest banks became a mass phenomenon, and many banks are demonstrating very high rates of decline in credit quality.

Such a development of events has been predicted for a long time, and the quality of loans issued in the post-crisis period has always been the most important factor of uncertainty in assessing the prospects of both individual banks and the entire banking system of Russia. A decrease in the share of overdue loans against the background of rapid growth of loans is an expected phenomenon, since a certain time passes between the issuance of a loan and the identification of its true quality.

The specificity of the expansion of lending in the period after the 1998 crisis consisted of several waves of the credit boom. First, the largest banks increased lending, then medium-sized banks, and then small banks. The highest growth rates of the loan portfolio of the 100 largest banks were shown back in 1999, significantly outstripping other groups of banks. In 2000, it was the turn of the second hundred banks to show the highest growth rates of loans, and in 2001, against the backdrop of a decline in the growth rates of lending, the banks of the third hundred took the lead in terms of asset size.

Problems with loans also began to appear. In the first half of 2002, the growth rate of the amount of overdue loans was 53.8% in the first hundred banks and 46.4% and 35.4% in the second and third hundreds, respectively. The growth rate of the amount of overdue loans, unlike in 2001, was noticeably lower than the rate of issuing new loans, which led to a deterioration in the quality of loans. It is worth saying that bankers do not yet recognize the problem of deteriorating loan portfolio quality as a general phenomenon. In each bank, this is only 1 - 2 loans, which, of course, were formed by chance and do not reflect the general problems in the banking system. But the repetition of problems from bank to bank allows us to talk about the presence of a trend. Partially, the growth of overdue loans in the first hundred banks was caused by just one company - "SIBUR", a truly special case. But still, SIBUR does not have many creditors, and the share of overdue loans in the loan portfolio increased for 59 (!) banks out of the 100 largest, for 52 banks in the second hundred, and for 34 banks in the third hundred. Moreover, the second quarter only worsened the overall picture.

So far, the situation with the loan portfolio is far from threatening. The share of overdue loans in the group of 100 largest banks (excluding SBS-Agro and Russian Credit) increased by 0.5 percentage points, reaching an average of 2%, but this level corresponds to the indicators of early 2001 and is much less than 5% at the beginning of 2000. And with respect to individual banks, the situation does not yet look threatening: out of 100 largest banks, only 6 banks have a share of overdue loans exceeding 5%, and only 24 exceed 2%. But six months ago, there were only 11 such banks in the top hundred. Banks with a share of overdue loans over 2% already account for 53.7% of the assets of the banking system. In the first half of 2002, the distribution of banks by the share of overdue loans clearly shifted for the worse.

GDP growth is not a panacea.

Often, when assessing the risks of banks, they cite data on the dynamics of GDP, which so far looks reassuring. Unfortunately, continued growth of GDP does not always guarantee the absence of problems for banks. The peculiarity of the credit boom in Russia after 1999 is that many banks began to issue loans to new borrowers for the first time. Not only trade and the raw materials sector, but also the processing industry began to receive loans more and more actively. Many of the new borrowers had never received loans; loans were issued based on expectations of growth in domestic demand, which actually grew.

Of course, new borrowers initially received small loans, which they successfully repaid, often refinancing at other banks. This provided grounds for increasing credit limits. Analysis of loan portfolios of individual banks shows how the same borrowers received larger loans year after year. Against the backdrop of rapid growth in lending in Russia, there was an obvious paradox: the share of the 10 largest borrowers in the loan portfolio of a typical Russian bank decreased very slowly.

In world practice, it is considered dangerous when the nominal growth rate of lending exceeds the interest rate. This means that the economy as a whole has the ability to refinance not only the principal debt on loans, but also interest payments. It is not necessary for all new loans to be received by the same enterprise, it is enough for its related companies to receive loans - all the same, it turns out to be impossible to distinguish real demand from credit demand. In Russia in 1999 - 2001, the growth rate of loans significantly exceeded interest rates. This method of credit growth causes significant concern, since it means a real increase in the vulnerability of banks to deterioration of the economic situation. Strangely, data on the deterioration of the quality of the loan portfolio of Russian banks coexist with optimistic macroeconomic reports on maintaining the growth rate of GDP. But there is no particular contradiction in this, on the contrary, world practice is fully consistent with such trends.

After the 1998 crisis, the Russian economy is undergoing a significant structural restructuring, which consists of the launch of new and the resuscitation of old production projects. In the context of structural changes, it is impossible to determine in advance which projects will be successful.

Unpleasant consequences.

The deterioration of the quality of banks' loans will also have indirect consequences. Seeing the deterioration of the quality of loans of counterparties, banks will be forced to reduce limits on the interbank market. The increased frequency of bankruptcies of banks, including quite large ones, greatly contributes to the increase of nervousness on the interbank market. Sharp jumps in profitability on the interbank market are directly related to peaks in tax payments of bank clients, but they clearly demonstrate that the problem of "excess liquidity", which so worried the monetary authorities in 1999-2000, has self-liquidated. Liquidity has gone into loans, and loans, by and large, have not yet begun to be repaid. Continuation of problems in the loan portfolio will inevitably lead to deterioration of the liquidity of the banking system.

In fact, the reduction of interest rates on loans has already ended, and there is no reason to expect easier access to loans. Interest rates have not been reduced for a year and a half. But inflation is gradually falling, the interest rate is growing, which does not contribute to the growth of the quality of loans. For now, the Russian banking system has time to adapt to the changed risks of lending. Perhaps for the first time since 1998, the environment is beginning to make serious demands on the quality of bank management. Probably, not all banks will pass this test.

MAIN QUESTION: The first bell of the crisis