Supply chain finance occupied a quarter of the total factoring portfolio in Russia

At the end of the third quarter, a quarter of the total factoring portfolio in Russia fell on supply chain finance (SCF). By 2024, the figure could rise to 30–35%, market participants believe. SCF allows factors to retain large companies as clients and maintain business volumes, but high portfolio concentration creates risks.

Kommersant got acquainted with the report of the Association of Factoring Companies (AFC) for the third quarter. According to the document, at the end of January-September, the Supply Chain Finance (SCF, supply chain financing) portfolio reached 461.4 billion rubles, accounting for 25% of the total market volume. This is by 7 p.p. more than in the first quarter. A year earlier, the indicator was not calculated.

According to AFK, the total portfolio of the factoring market at the end of the third quarter reached 1.79 trillion rubles. This is 33% more than a year earlier. The total factor income for the period amounted to RUB 96.6 billion. The number of active factors on the market was 11 thousand, active clients – more than 13 thousand.

The share of the five largest players (SberFacting, Alfa-Bank, VTB Factoring, GPB Factoring, PSB Factoring) accounts for 93% of the financing volume of the SCF segment – 432 billion rubles. But according to the results of the third quarter, changes occurred within the top five: Alfa Bank (RUB 94.5 billion) rose from third to second place during the quarter, overtaking VTB Factoring (RUB 76.1 billion). Sberbank remained the largest factor in the segment (RUB 175.2 billion), as follows from AFK materials.

It was supply chain factoring that helped the market recover in 2023 after falling to almost 900 billion rubles. in 2022, and its share will grow, notes Sergei Grishunin, managing director of the NRA rating service. He estimates that by 2024, the share of SCF in the portfolio could grow to 30-35% of portfolio volume. “Agency (reverse) factoring allows both buyers and suppliers to free up working capital from unpaid invoices,” explains Mr. Grishunin. “Before SVO, this problem did not arise, since there was no need to create large inventories of goods and components (there were no delays in deliveries and problems with payments for them), as well as the risks of non-payments from buyers were low.”

The increase in the share of SCF programs in the portfolio is also associated with the development of technical capabilities of factors, notes General Director of VTB Factoring Igor Vnukov: “It is becoming increasingly easier to automate and digitalize the process of onboarding and financing a large flow of suppliers.” In addition, he clarifies, for factors, the development of SCF programs has become an effective tool for retaining large companies and maintaining business volumes, since in addition to financing, debtors synchronize financial and operating cycles and increase the stability of supplies.

The growth driver of the segment will be industrial enterprises that use SCF as a payment calendar management tool, believes Boris Sobolev, director of the factoring operations department at PSB. In the fourth quarter, the SCF portfolio could grow by another 50% due to payments by vertically integrated oil companies for current and accumulated accounts payable, he expects. For large companies with an extensive network of counterparties, uninterrupted supply, quick settlements with suppliers and the ability to make large volumes of payments are important, notes SberFactoring CEO Igor Lysenko.

But there are also risks, Mr. Vnukov warns: “High concentration of the portfolio on a limited number of companies, which requires a high culture of risk management.” Now, for the most part, the financing of the chain ends with the supplier who delivered the final product to the debtor, and, accordingly, the risks are minimal. But, Boris Melnikov, general director of Rosbank Factoring, fears, “if you look further and expand the chain to the second, third generation of suppliers, the risks increase significantly: without proper automation it is difficult to track the execution of intermediate orders or deliveries.”

Polina Trifonova