In the third quarter of 2023, creditors significantly increased the supply of overdue debt

In the third quarter of 2023, lenders significantly increased the supply of overdue debt. This happened not only against the backdrop of a strong rise in prices, but also an increase in efficiency in debt collection. However, market participants believe that prices have approached their ceiling and they should not expect further growth. At the same time, market growth will be limited by both the rising cost of funding for collectors and the growing age of the portfolios offered for collection.

In the third quarter of 2023, the volume of supply of overdue debt from banks and microfinance organizations increased sharply. According to the Debex online auction, the total supply of debt under the assignment scheme amounted to 48.6 billion rubles. This is 35% more than in the second quarter and 27% more than a year earlier. Apparently, lenders were attracted by the high prices that formed in the market. According to Debex, in the third quarter, average prices for bank overdue loans reached 11.3% of par value, and for MFO debts – 14.4%. A quarter earlier, average prices were 9.9% and 14.8%, respectively, and a year earlier – only 7.9% and 9.9%.

Moreover, the increase in prices for bank overdue loans occurs even against the background of the fact that lenders are reducing the sale of the “youngest” and most expensive overdue loans. According to the head of the ETP “Debt Market” Denis Belkin, in the structure of sold bank debt from the fourth quarter of 2022 compared to the third quarter of 2023, overdue payments up to 180 days decreased by five times.

The rise in debt prices was influenced by several factors, market participants note. “Firstly, pent-up demand: in the second half of last year there was little debt for sale. Secondly, collectors have reduced the cost of processing each case through digitalization of collection,” notes Debex CEO Marat Brook. According to him, since the middle of last year, a lot of microservices have appeared on the market that simplify and speed up the collection process. Bankers are also talking about increasing the efficiency of collection. The head of the VTB financial settlement department, Evgeny Novikov, notes a reduction in the cost of collection “due to the use of innovative technologies: electronic interaction with government agencies, robotization of the process, the use of ML, AI models, speech technologies.” Accordingly, collectors are ready to buy out more problematic portfolios that would previously have been unprofitable, Kommersant’s interlocutors agree.

At the same time, prices have already approached the maximum values, market participants note. “They simply have nowhere to grow,” says Mr. Brook. In addition, the new key rate makes borrowed money more expensive for creditors, which should limit price growth in the future. Collectors simply will not be able to buy out debts as expensively as they are now, he admits. “The payback for collection agencies at current prices can reach three years, which is quite a lot. Therefore, we can expect that prices have really reached their ceiling and will, if not decrease, then remain at approximately the same level,” agrees Andrey Ponomarev, CEO of the online financial platform Webbankir. “In the medium term, the market will be put under pressure by rising funding costs, and in the long term by rising bankruptcies,” adds another Kommersant source in the foreclosure market.

NAPCA is confident that the assignment market will record growth this year. It will happen due to the “maturing” of debts that fell into overdue debt during the recovery of the lending market in 2021–2022. “In addition, reserves need to be created for the portfolio of overdue debts. Therefore, creditors are putting overdue debts up for sale,” the industry association believes.

Polina Trifonova