Amid rising interest rates, businesses are trying to borrow less
[ad_1]
Against the backdrop of rising rates, business interest in lending is decreasing. For some business segments, loan rates tied to the key rate of the Central Bank become prohibitive, since there is no comparable level of profitability. Sberbank expects a 15–20% drop in issuances in the coming months.
First Deputy Chairman of Sberbank Alexander Vedyakhin, on the sidelines of the Finopolis forum on November 9, announced a reduction in the number of loan applications from companies. This happens after the Central Bank’s key rate increased – in early November the regulator raised it by 2 percentage points, to 15%. In general, since mid-July the rate was increased by 7.5 percentage points, that is, twice.
“At the key rate of 15%, and we issue a “key rate plus”, applications for investment lending, long-term financing and so on drop sharply,” explained Mr. Vedyakhin. Two days earlier, the head of Sberbank, German Gref, was not so categorical and said that for now the bank was still observing a “small decline” in the corporate portfolio.
The bank expects that in November-December there will be a “sharp decline” in the pace of lending to legal entities. According to the top manager, the drop could be 15–20% compared to the previous month. Sberbank has 3.1 million corporate clients, the volume of the portfolio at the end of the third quarter of 2023 was 22.7 trillion rubles, the majority (13.9 trillion rubles) is commercial lending, the rest is project financing. Half of corporate loans are issued at a floating rate.
The Central Bank also expects that in the fourth quarter, taking into account the rise in rates, the banking sector will show a slowdown in corporate lending. At the end of September, growth was still maintained (by 2%, to 70.5 trillion rubles), as stated in the review of the development of the banking sector. However, the annual growth rate has already begun to decline: to 19.5% in September from 20% in August. There are no data on the dynamics of corporate lending for October yet.
“With such a key rate, few people can take out loans,” says Alexey Voylukov, vice-president of the Association of Russian Banks. For businesses, they “become unbeatable,” since there is no comparable profitability, he explains: “They take it either out of a hopeless situation or with a good margin of safety, in the hope that the Central Bank will nevertheless begin to lower the key rate and will not strangle business with its tough approach.”
At the beginning of 2022, after a sharp rise in the key rate, loan issuance volumes also fell. “Few people can cope with such an inflated rate, especially for a long time. And it looks like this time business could suffer seriously, since according to the Central Bank’s statements, we are only at the beginning of its tightening of monetary policy,” says Mr. Voylukov.
At the end of October, VTB First Deputy Chairman Dmitry Pyanov warned that lending could slow down significantly and follow the Brazilian scenario, when only subsidized loans are issued to both companies and the population.
Typically, during crises, the demand for corporate lending decreases, since the main need for borrowing from businesses is related to investments, and during a crisis, investments stop, analysts say.
However, the current crisis is different from previous ones. Now there is a great demand for goods and services in the economy, but there is not enough production capacity. “This means that businesses need to invest,” believes Ilya Zharsky, chief managing partner of the Veta expert group.
Against the backdrop of rapid growth in the money supply, a large number of companies have no problems with working capital, analysts note. However, as Gennady Fofanov, president of the Invoicecafe investment platform, notes, there remains high demand in the corporate lending segment from industry and developers. Also, according to the expert, the demand for the purchase of assets that are sold by non-residents leaving the Russian market remains and even grows.
[ad_2]
Source link
