Russian macro: credit market getting back to normal
Even though banks were among the first targets of the Western sanctions that bombarded the Russian economy last year, the country’s banking sector reported profits in 2022 as a whole, as 2H22 profits overshadowed 1H22 losses. As geopolitical changes forced the domestic economic environment to change, banks were able to adjust their loan portfolios and policies in line with the ongoing economic transformation. One such change is the continuous expansion of mortgages. What looks quite remarkable is that despite accelerated inflation, the average maturity of mortgages increased to 290 months in December 2022 (from around 250 months at the beginning of the year). Total lending to households didn’t grow that fast, as uncollateralized consumer lending was under pressure from high inflation and shrinking consumer demand, especially in 1H22. On the contrary, corporate lending grew fast in 2022. The increased indebtedness of households and the corporate sector helped to avoid a deeper contraction both in 2020 and 2022. Such developments didn’t threaten macroeconomic stability as the Russian economy is not overly indebted.
Russia can still expect fast credit growth this year (i.e., much faster than that of nominal GDP), but longer-term lending growth should moderate to avoid a hypothetical debt crisis. This means that as the fiscal stimulus, such as government spending combined with subsidized credits, diminishes in the years to come, the role of the CBR will gain importance. It will need to find the right balance between the need to support the economy and keep inflation at bay, which may not be an easy task given that the ongoing structural adjustment of the Russian economy to the new geopolitical environment is set to continue for years.
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