Credit growth sped up to 0.7% m/m in September from 0.5% m/m in August, thus extending the upward trend that started in June, according to exchange rate adjusted data published by the CBR on Wednesday. Credit activity remains mainly driven by lending to households, which rose by 1.3% m/m in September (+1.6% m/m in August), reflecting stronger-than-average growth in the unsecured and mortgage segments amid falling interest rates. Note that the former reflects increased demand for credit, especially among low-wage earners in poorer regions, whereas the latter is stimulated by easing credit terms by banks. Both trends pose potential risks to financial stability and need to be watched. Lending to companies also picked up, advancing by 0.5% m/m in September (+0.1% m/m in August), the figures showed.
Real sector deposits expanded by 1.8% y/y in September, after an increase by 2.1% y/y in August as they declined by 0.8% m/m, which compares to average growth of 1.2% m/m for the same month in the last seven years. Still, we believe that this monthly outcome was driven by the banking sector jitters during the period, rather than falling propensity to save. Household deposit growth came in at 6.2% y/y (+6.1% y/y in August), whereas the decline in corporate deposits deepened to 2.3% y/y. Both deposit segments saw their forex deposits falling further during the month, a process which seems underpinned by relatively stable situation with the ruble. This is also suggested by the fact that deposit dollarization fell further to 30.2% in September from 30.9% in August and 34.7% in Sep 2016. The CBR expects households’ propensity to save to fall only gradually, shifting towards bigger consumption over time amid falling deposit rates.
The CBR data also showed that the banking sector’s net profit came in at RUB675bn in Jan-Sep, which represents an increase by 6.3% y/y, though the figure fell sharply from RUB997bn in Jan-Aug, because of losses at Otkritie and BinBank The combined net profit would have reached RUB1.1 trillion if there were no such programs, the CBR said. The CBR now expects the sector’s full-year profit to reach RUB1 trillion, down from the previously expected RUB1.2 trillion. Loan-loss provisions rose by 13.6% y/y to RUB6.2 trillion in September.