Credit activity of Russians with low incomes increased in Q1 – Alfa Bank

TASS Russian News Agency | Aug 15, 2019 at 6:47 PM

MOSCOW, August 15. / TASS /. The credit activity in Russia in Q1 of 2019 shifted to population groups with an average monthly income of about 13,600 rubles ($206), according to the review of the debt burden prepared by Alfa Bank reported on Thursday.

"[The growing demand for loans] in Q1 2019 and the Central Bank’s intentions to tighten the regulation of the retail lending market indicate the potential risk of growth of bad loans in this segment. Based on the statistics for Q1 2019, the financial behavior deserves special attention for these groups in which the average monthly cash income per person amounted to 13,600 rubles and 16,300 rubles in Q1 2019. A shift in financial activity to less profitable groups is a negative signal, Alfa bank notes.

However, analysts point out that the expected acceleration in budget spending growth, including the increase in salaries for the military planned for September - October, can accelerate the growth of Russian GDP in 2020 and may improve the dynamics of population incomes, which will help the population cope with credit risks. "We believe that budget spending growth will support the creditworthiness of the population, and provided that the Central Bank’s policy on cooling growth in the retail lending market is balanced, less profitable, these groups will be able to lower their debt burden in the future without creating credit crisis risks," the report says.

Alfa Bank explains that an increase in lending to a group of borrowers with a monthly income of 13,600 rubles shows the fastest growth among all groups of borrowers. In the Q1 2019, against the backdrop of a jump in inflation and an increase in VAT, most borrowers with different income levels were forced to borrow more. On the one hand, the report says, this is good news for banks, because unlike in 2018, when demand for loans came mainly from low-income groups, in the Q1 of this year, demand for loans could grow from wider circle of borrowers. Nevertheless, the flip side of this process may be that more people could borrow money to maintain, and not to improve their standard of living, the material says.