Pawnshops recaptured gold – Newspaper Kommersant No. 231 (7432) of 12/13/2022
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In the second half of 2022, pawnshops leveled losses received against the backdrop of sharp fluctuations in gold prices at the beginning of the year. Up to 90% of deposits are for gold jewelry, which was often accepted at a high price and sold at a decline. However, in the second half of the year, the industry faced new challenges, including a drop in demand for pawnshop services amid partial mobilization. And if this year the segment ends without a decrease in turnover, then next year the market is not immune from such a scenario.
The situation in the pawnshop market in the second half of 2022 stabilized, despite the problems they faced at the beginning of the year amid high volatility in gold prices, market participants believe. “The negative effect has already been leveled. Moreover, the cost of gold in rubles has recently increased slightly, which has already affected the growth of the average valuation in pawnshops,” says Aleksey Lazutin, Chairman of the Board of the National Association of Pawnshops (NOL). In addition, the segment of pledges of mobile equipment and electronics is actively growing, which is not so dependent on currency fluctuations and changes in gold prices. Although now, on the scale of the entire business, they rarely occupy more than a few percent, Ivolga Capital experts point out.
According to the Bank of Russia, in the first half of 2022, the portfolio of pawnshops amounted to 50.2 billion rubles. This figure has been rising since the end of 2021. However, the volume of loans issued decreased: in the first quarter it amounted to 61.6 billion rubles, in the second – 57.8 billion rubles. Only about a third of pawnshops, mainly the largest network players, recorded an increase in demand for their services in the first half of the year. At the same time, the number of existing borrowers, as well as the number of existing contracts, did not change.
According to NOL estimates, the total portfolio of the pawnshop market by the end of 2022 may grow to 70 billion rubles, 55-60 billion rubles. of which will make up the classic pawnshops market, the rest will fall on adjacent segments (thrift stores). However, the risks that the industry faced in the first half of the year may be repeated in 2023, market participants and experts are sure. And it can be difficult to level them even despite the growth of TIC (see Kommersant of December 9).
Such fluctuations in the market within one half year are associated with significant fluctuations in gold prices (it accounts for up to 90% of collateral). In early March, gold quotes on the Moscow Exchange reached 8 thousand rubles per year, which exceeded the values at the beginning of the year by 1.7–1.9 times. However, by the middle of the second quarter, prices dropped below 4 thousand rubles / year, and pawnshops faced the fact that the value of collateral fell and their sale did not cover the amount of the client’s debt (see Kommersant of May 16 and June 24). Of course, this problem was mainly faced by small players who did not have a working capital reserve, Mr. Lagutin notes. They sold unclaimed things that they took as collateral in March-April with significant losses, some market participants could not withstand such pressure.
Despite the development of other types of collateral, the turnover of physical gold in Russia will continue to grow in the medium term. Given conservative forecasts for a reduction in unemployment in the market, creditors are unlikely to significantly weaken the scoring. All this will fundamentally support the demand for pawnshop services, Alexey Lazutin believes. However, there are still risks of the ruble strengthening against major currencies, which will lead to a decrease in the price of gold in Russia, he warns.
But not all market participants are so optimistic. Since the beginning of the year, the cost of gold has decreased by 15%, points out Stanislav Boronin, general director of the Fianit pawnshop network, respectively, and the money turnover of the industry has proportionally decreased. In addition, internal shocks change people’s behavior patterns. So, for example, after the announcement of partial mobilization in all regions, the demand for loans in pawnshops decreased by 15-20%, he notes. And in 2023, he does not expect growth in the industry. In the current environment, the demand for jewelry is falling, respectively, the volume of physical gold on hand is declining and in the medium term this will reduce the volume of the pawnshop market, Mr. Boronin fears.
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