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Why banks lower interest rates on loans

Зачем банки понижают ставки по кредитам

May 16, Sberbank has lowered rates on consumer loans by a few percentage points depending on the term and conditions of the loan. New level roughly corresponds to the pre-crisis indicators. Or at least until the acute phase, occurring in late 2014 — early 2015. We can assume that Sberbank saw in the long term, a General economic recovery and, consequently, the willingness of citizens to take more. Follow his example, other credit institutions and can the Russians increase the already heavy tax burden — remains in question.

Ignoring the crisis

Russia’s largest Bank decided to lower interest rates on loans, although growth in the economy is not observed. In the first quarter of 2016, GDP declined compared to the same period last year by 1.2 percent. For the whole year is expected to decline, and more severe than predicted earlier. So, the world Bank predicts a decrease in GDP of 1.9 percent, but above expected 0.7 percent. Has lowered its forecasts, the IMF and representatives of the expert community. Only the Ministry hope that GDP will fall by less than a cent and the bulk of the decline this year is already behind us.

In addition, the Bank of Russia on-former does not hurry up to reduce the key rate. The Central Bank believes that inflation is too high for monetary easing. The regulator aims to reduce the price growth to 4 percent next year, but confidence that it will happen, the Central Bank no. If in coming months the rate will drop, then only a modest half a percentage point.

The investors are still interested to invest in Russian assets at high interest rates, but banks, at least in theory, remain on a starvation diet. In practice, it is even more interesting: the refinancing from the regulator doesn’t come, as it is for credit institutions not too profitable. Simultaneously the conversion into rubles of the Reserve Fund provides large-scale flow of funds to the banks from the budget.

Apparently, these considerations come to mind, and the officials of the Ministry of economic development. The Ministry Alexei Ulyukayev said that Russian banks will reduce lending rates after the savings Bank. The Department also expect further rate cuts in the second half of 2016, citing both the increase in the volume of liquidity in the market and further disinflation (slowing price growth).

Зачем банки понижают ставки по кредитам

Photo: Alexander Koryakov / Kommersant

The revival of the sector

“Most commercial banks, especially the top, look at the rates of the savings Bank movement, therefore, we should expect lower interest rates on loans and other market actors about comparable value,” he said. The cheaper the borrowed funds will support the level of domestic demand from the population, said the head of Ministry of economic development.

The situation in the banking sector as a whole also gradually improving. After the massive “die-off” of the credit organizations in 2013-2015 surviving banks have strengthened their balance, to set aside enough reserves for possible losses. In the first four months of 2016, Russian banks earned a total of 167 billion rubles. For comparison, in the same period last year they recorded a loss of $ 17 billion. And for the entire year earned less than 200 billion. According to the Central Bank, Russian banks have free capital reserve of 1.7 trillion rubles, and it allows us to increase lending to the economy.

The fact that the banks are tighter on the legs, was not lost on outside observers. Thus, Moody’s analysts expressed confidence that in 2016 the situation in the Russian banking sector will continue to improve.

The market reaction

It is believed that many Russian banks are closely watching the actions of the largest player and repeat them as much as possible. “Given the increase in delinquencies on the loans as individuals, and the corporate sector, banks need to attract reliable borrowers, timely servicing debt and making payments. For this it is necessary to create the appropriate conditions of lending and the most important among them is the loan rate. Some banks operate on an advancing, trying to attract new customers. Note that this efficiency is caused by the adequacy of liquidity in the banking sector, credit organizations are looking for opportunities to invest”, — said “the Tape.<url>” group analyst “Finam” Bogdan Zvarich.

Зачем банки понижают ставки по кредитам

Photo: Alexander Artemenkov / TASS

At the same time, the respondents “Tape.<url>” banks are wary about cheapening of consumer loans, although the process albeit slowly, but is already underway. The Ural Bank for reconstruction and development (UBRD) stressed that adjust rates on consumer loans on an ongoing basis. The last time rates were reduced at the end of March by 1.5-2 percentage points. In June, the Bank intends to review the rates for line of credit programs.

This easing, there is a downside. “Loan pricing reflects risk, and, reducing it, banks have to reduce lending to various segments of clients, focusing on the most reliable. This ultimately affects the average consumer, who either reduce the credit limit or even refuse the loan”, — explained the head of the Directorate for development of business with physical persons UBRiR Elena Babina.

In a press-service of the Moscow credit Bank announced that they plan to reduce base rates on consumer credits, may 23rd at 1-3 percentage points. The minimum bet for the consumer loan for payroll clients will be 16 percent.

Head of unit “Retail business” Bank Vozrozhdenie Eugene Dmitriev said that his organization also monitors the actions of the competitors: “where appropriate, carry out the adjustment. Most likely, in the near future we will also revise rates.”

Plans to lower the rates shared in Alfa-Bank and “Opening”. “URALSIB” has reduced rates on the average on 1-1,5 percentage points in the middle of the first quarter of 2016.

In “VTB 24” also do not exclude further reduction of interest. In 2014 the Bank level of interest rates on cash loans were in the range from 18.5 to 29.5 percent in 2016 from 16.5 to 27 percent.

Зачем банки понижают ставки по кредитам

Photo: Anton Belitsky / Kommersant

Money is not for everyone

At the same time, it is unclear how ready the citizens of Russia to go to banks for money. Too highly leveraged population. The study shows NBCH, published on 16 may, most credit score potentially vulnerable social strata — for example, doctors, teachers and employees of the social sphere.

Rest is also quickly catching up. Over the past six months the highest dynamics of growth of the debt burden of borrowers by industry are shown in the “Telecommunications and communication” and “Information technology”: 17.4 and 15.4 percent, respectively.

In General, the volume of payments is slightly less than a third of the monthly income of Russians, and the amount of delay is close to 10 percent. All this creates a rather unfavourable conditions for the expansion of consumer credit.

In a similar way we argue and in some credit institutions. According to Eugene Dmitriev from “Revival”, a substantial increase in demand in response to lower rates is not expected. Most likely, customers will use new rates for lending — will issue earlier loans on more favorable terms. It’s possible that the caution of the Russians, coupled with the tightening of selection of potential borrowers will bring down credit growth in the country is on the rise.

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