Profitability was laid in pawnshops – Newspaper Kommersant No. 27 (7472) of 02/14/2023

In 2022, the pawnshop market showed a high — more than 10% — profitability. The maximum for three years was facilitated by regulatory easing introduced in the second quarter due to lower gold prices – a moratorium on limiting the total cost of credit (FCC). However, already in July it was canceled, and the pawnshops themselves faced an outflow of customers against the backdrop of mobilization and a reduction in the term of loans due to the transition of citizens to a savings model of behavior. Since March 2023, pawnshops have been waiting for an influx of customers, but not an increase in checks and loan terms.

At the end of 2022, the profitability of the pawnshop portfolio was 10.2%, the highest figure in three years. In 2021, it was at the level of 8.3%, in 2020 – 8.6%. This follows from the data of the Regional Association of Pawnshops (RAL). According to the Central Bank for the six months of 2022 (more recent Central Bank data has not yet been published), the loan portfolio for the first half of the year amounted to 50.2 billion rubles. According to Alexei Lazutin, Chairman of the Council of the National Association of Pawnshops, the portfolio of pawnshops, together with commissions, reached 60 billion rubles at the end of the year, and only 50 billion rubles for pawnshops. Growth rates were insignificant, but better than forecasts, when market participants expected the portfolio to fall by 10%.

The high profitability of pawnshops in the past year is largely due to concessions from the Central Bank. In the second quarter, the regulator lifted the limit on the marginal lending rate (MLC) for the industry to compensate for losses due to lower gold prices (see Kommersant dated June 24, 2022). After almost doubling the value of gold on the stock exchange in March, up to 8 thousand rubles. per 1 g, prices fell below 4 thousand rubles by May. for 1 year. As a result, rates on loans with gold as collateral in pawnshops last year increased from 125% per annum in the first quarter to 159% per annum in the fourth quarter. For loans in which a car is provided as collateral, the rates were 80-100%. However, according to the Central Bank, 81% of collateral falls on gold. Moreover, 25% of gold deposits remain unclaimed and are sold by pawnshops as jewelry or as precious metal scrap for processing.

However, since the middle of last year, the Central Bank has returned the restriction on the PSK, despite the fact that industry participants advocated its abolition altogether (see Kommersant dated December 8, 2022). This will put pressure on the profitability of the industry, together with a change in client behavior: by the end of 2022, the average loan term at pawnshops has been reduced three times, from 180 to 60 days, Artem Yevstratov, a member of the board of the RAL, notes. “Revenue fell (according to previously published estimates, by 20–30%; see Kommersant dated December 8, 2022), the loan portfolio decreased, the regulatory burden increased (see Kommersant dated September 15, 2022), and since November last year, the demand for pawnshop services also began to fall,” he describes the situation on the market. And while a significant improvement in the dynamics of the market should not be expected, the interlocutor of Kommersant is afraid. For the first quarter of 2023, the TIC is set at 131%.

Since the announcement of partial mobilization, the demand for loans from pawnshops has decreased, “non-food consumption has decreased, people’s need for money has decreased,” confirms Stanislav Boronin, general director of the Fianit pawnshop network. In addition, many pawnshop clients were among those who, voluntarily or as a result of mobilization, participate in hostilities on the territory of Ukraine, he continues. They receive payments, and their families do not currently need the services of pawnshops.

Since March 2023, the segment has been waiting for an influx of new customers against the backdrop of tougher scoring by MFIs (see Kommersant on February 8) and rising unemployment. However, they are unlikely to bring more expensive collateral for longer periods – “consumer spending is reduced, amid uncertainty, borrowers prefer to keep potential collateral with them,” the pawnshop market is sure.

Polina Trifonova