Central Bank analysts estimated the share of newcomers in corporate credit expansion in 2018–2021

Central Bank analysts examined the recent history of corporate lending in Russia using the lowest level of data detail available. First of all, they assessed how much of the credit expansion in 2018–2021 came from companies that already had borrowing experience and how much from newcomers to the corporate bank lending market.

It turned out that in absolute terms the share of loans accounted for by newcomers (the extensive component of loan growth) is quite small. At the same time, the authors of the study note: “A fact that is not obvious at first glance, which we confirm in the course of the study, is that their contribution to fluctuations in the growth rate of credit aggregates, on the contrary, is large.” The reason for this is that mature corporations (the growth-intensive component) borrowed and repaid comparable amounts—whether the borrowers were the same or repaid by the same borrower or different borrowers. As a result, the net contribution of such an intensive component to credit expansion is small (see graph).

During the acute phase of the pandemic (from June 2020 to May 2021), the role of concessional lending first noticeably increased and then decreased. For companies new to the lending market from affected industries, this initial growth was especially noticeable. This also determined the low level of non-payments on the first loans issued to companies. For experienced companies, the contribution of preferential lending to the growth of corporate loans was relatively stable until July 2021, after which the contribution of the “non-concessional” component began to grow rapidly.

In addition, since April 2021, the proportion of borrowers who had open but unused credit lines has increased. While such borrowers may quickly increase their lending during periods of economic turmoil, creating additional risks for banks, actual drawdown of credit lines may be limited by contractual provisions, such as overestimation of the value of the borrower’s collateral, leading to a reduction in available limits in adverse economic conditions, the researchers conclude.

Artem Chugunov