Not enough growth factors

At the end of 12 months of 2022, the factoring portfolio was 6% lower than a year earlier, amounting to RUB 1.42 trillion. Given the difficulties that the Russian economy faced in 2022, the fall could have been more noticeable, market participants believe. They look at 2023 with caution, assuming, if not a fall, then, at best, stagnation at the level of 2022. The reason in the industry is called sanctions pressure, difficulties with logistics, a short planning horizon, as well as a redistribution of the client base left over from foreign players who have stopped working.

At the end of 2022, the factoring portfolio in Russia amounted to 1.42 trillion rubles. This is almost 6% less than a year earlier, according to preliminary data published by the Association of Factoring Companies (AFC).

Unlike a number of other segments of the financial market, factoring could not fully recover from a sharp dip in the second and third quarters, despite seasonal growth in the fourth – 204 billion rubles, 16.7% more than the previous quarter, according to AFK materials .

At the same time, the year was a record year for the factoring market in terms of the influx of new customers. Thus, the number of active clients reached 11.95 thousand companies, which is 9% more than in 2021. Only in the last quarter of last year, their growth amounted to 19% – 1910 legal entities (901 – in the third quarter), cite data in the AFC. This is the highest number of customers since 2018.

The negative impact on the market is exerted by sanctions pressure, which reduces the volume of trade and disrupts the established supply chains, said Yegor Lopatin, deputy director of the group of ratings of financial institutions of the NKR agency. In his opinion, the results in 2023 will depend on macroeconomic conditions.

The brake on the development of factoring is also the level of demand for goods and services during 2023, adds AFK Executive Director Dmitry Shevchenko, as well as the risks of new logistics models introduced in the second half of 2022. “Factoring as a financing tool is adapted for sustainable supply chains. How it will be with sustainability in logistics is still difficult to assess,” he explains.

“Increased uncertainty in the markets and worsening business conditions for a number of large enterprises embedded in global production chains and ensuring stable growth of the factoring market in previous years have multiplied the risks for factors. Uncertainty has increased, the credit quality of companies has decreased, and behind it the expediency of actively increasing the volume of financing issuance,” VTB notes.

In addition, over the past year there have been changes in the portfolios of factors with foreign participation, says Boris Sobolev, director of the factoring operations department at PSB. “Sanction pressure and changes in logistics routes in export-import operations are leading to a restructuring of the client base: suppliers and contractors of companies included in the US SDN list are switching to servicing Russian factors,” he explains.

In their expectations for 2023, market participants differ. Factoring is included in subsidy programs, including industry-specific ones, says Sberfactoring CEO Igor Lysenko. This, in his opinion, can provide the market growth at the level of 10-15%.

On the contrary, Boris Melnikov, General Director of Rosbank Factoring, believes that it will be a success if the market manages to keep the last year’s figures. According to Mr. Melnik, the downward trend of factoring could be corrected and the basis for growth would be “supported by the state, creating conditions for increasing business volumes, and expanding the planning horizon due to greater certainty in the future.”

Polina Trifonova