According to the results of the first half of 2023, the factoring market portfolio amounted to a maximum of 1.62 trillion rubles.
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According to preliminary data from the Association of Factoring Companies (AFC), in the first half of 2023, the factoring market portfolio amounted to a record RUB 1.62 trillion. The market showed an almost doubling of the portfolio year-on-year on the back of the business’s need for a quick replenishment of working capital. However, already in the second half of the year, the development of the segment may slow down, experts warn.
At the end of the first half of the year, the factoring market portfolio amounted to 1.621 trillion rubles, according to preliminary data from the AFC. This is the highest figure in the entire history of observation and is 73.4% more than in the same period last year. At the same time, it should be taken into account that according to the results of the last half of the year, in contrast to the current reporting period, data were not submitted by VTB Factoring. If we subtract the results of the company (221.18 billion rubles), the growth of the factoring market portfolio will be about 50% yoy. According to the results of the first half of the year, the number of active clients of factoring companies increased by 22.4% year-on-year, amounting to 11.137 thousand companies, follows from the AFC materials.
“We are now seeing the effect of budget consolidation: super-concessional state lending to working capital has ended, stimulation is targeted and only for investment purposes. And this will not change in the second half of the year,” Dmitry Shevchenko, executive director of AFK, explains the growth. The record portfolio at the end of 2023 is real in the absence of external shocks and the continued structural transformation of the economy, he is sure: the demand for accelerating the turnover of receivables is growing, this is the best time for factoring.
Factoring is operational short-term financing of companies against the assignment of their receivables (future payments by a third party for the supply of goods).
The factors polled by Kommersant also recorded an increase in portfolios by 18–50% in the first half of the year. At the same time, growth in the second half of the year will not be as aggressive as in the first, says Boris Melnikov, general director of Rosbank Factoring. According to Igor Lysenko, General Director of Sber Factoring, market growth in the second half of the year may be at the level of 10-15%.
Factoring showed the greatest dynamics in industrial sectors such as mechanical engineering and metallurgy. Growth in the corporate business segment was 27%. Small and medium-sized businesses also demonstrate a high demand for factoring products, says Viktor Vernov, CEO of the ROWI fintech platform. In the second half of the year, the expansion of the product line of factors will be added to these drivers: experiments with DFA and the stable development of ABL-financing (asset-based lending, see Kommersant of February 21, April 11).
“Growth became possible through work with industries and companies that were previously out of sight for a number of reasons or work with which was limited,” agrees Mr. Melnikov. “The market is recording an increase in the volume of deliveries in the Russian industry due to the import substitution vector. Plus, the development of new directions is being activated – for example, commodity factoring is gaining momentum. The solution is in demand in the automotive industry, as it allows dealers to convert the current warehouse of equipment into working capital,” continues Igor Lysenko.
However, the beginning of the second half of the year was marked by increased uncertainty in the financial markets, warns Igor Vnukov, General Director of VTB Factoring. On the one hand, this leads to an increase in the complexity of financial planning with a horizon of more than 9–12 months. And factoring in such conditions has advantages due to the short terms and short-term nature of raising capital.
The average portfolio turnover period in the market is about 60 days, Mr. Vnukov explains. “At the same time, a potential increase in the key rate will obviously reduce the availability and limit the demand of enterprises for external financing. Factoring will not be an exception,” he concludes. “Among the constraining factors, one can also note the increased competition between factoring and credit solutions,” adds Viktor Vernov. “First of all, this is due to the strengthening of state support for SMEs, which is now more directed towards lending.”
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